The net exports and the table shown gdp
Macro--Final Quiz (take home style)
Short Essay--10 points each
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2. State the difference in behavior between a Normal Good vs. an Inferior Good.
Answer:
This occurs when there is an optimal distribution of goods and services, taking into account consumer’s preferences. A more precise definition of Efficient Allocation is at an output level where the price equals the Marginal Cost (MC) of production. This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get. Therefore the optimal distribution is achieved when the marginal utility of the good equals the marginal cost.
In below mentioned figure, we can see that the supply curve shifts to the left. Here price remains the same. Initially when price was $4, the quantity supplied was 40 units but afterwards, at the same price of $4, the quantity supplied is lowered to 20 units. Therefore, the current market price is not changed as the market price is assumed to be constant at all times.
| Price | Quantity |
|---|---|
| $4 | 40 |
| $4 | 20 |
Answer:
Consumer surplus is the difference between what a consumer is willing to pay for a good and what the consumer actually pays. There is extra benefit from paying less than the maximum price. For example:
7. Describe the characteristics of a Public Good.
Answer:
Examples of public goods: street lights, defense produce, clean air, firework display etc.
8. Explain what is meant by a “Sticky Price”.
9. What components keep us from double counting with GDP (Gross Domestic Product)?
Answer:
Answer:
Expenditure approach to GDP is to add up the market value of all domestic expenditures made on final goods and services in a single year. The GDP under the expenditures approach is calculated by adding up all the expenditures made on final goods and services produced within the geographical boundaries of a region. These include consumption expenditure (by households), investment expenditures (by businesses), government expenditures (on purchase of goods and services) and net expenditures by foreigners (i.e. net exports which in turn is equal to total exports minus total imports).
GDP = 304 + 156 + 124 + 18 = $602
