Page 192 - Krugmans Economics for AP Text Book_Neat

Key Terms

National income and product accounts, p. 102 Final goods and services, p. 106 Frictional unemployment, p. 127
National accounts, p. 102 Intermediate goods and services, p. 106 Structural unemployment, p. 128
Household, p. 103 Gross domestic product (GDP), p. 106 Efficiency wages, p. 130
Firm, p. 103 Aggregate spending, p. 106 Natural rate of unemployment, p. 130
Product markets, p. 103 Value added, p. 107 Cyclical unemployment, p. 130
Factor markets, p. 103 Net exports, p. 108 Real wage, p. 135
Consumer spending, p. 103 Aggregate output, p. 113 Real income, p. 135
Stock, p. 104 Real GDP, p. 114 Inflation rate, p. 135
Bond, p. 104 Nominal GDP, p. 114 Shoe -leather costs, p. 137
Government transfers, p. 105 Chain-linking, p. 115 Menu costs, p. 137
Disposable income, p. 105 GDP per capita, p. 115 Unit -of -account costs, p. 137
Private savings, p. 105 Employed, p. 119 Nominal interest rate, p. 138
Financial markets, p. 105 Unemployed, p. 119 Real interest rate, p. 138
Government borrowing, p. 105 Labor force, p. 119 Disinflation, p. 139
Government purchases of goods and services, Labor force participation rate, p. 119 Aggregate price level, p. 142
p. 105 Unemployment rate, p. 119 Market basket, p. 142
Exports, p. 105 Discouraged workers, p. 120 Price index, p. 143
Imports, p. 105 Marginally attached workers, p. 120 Consumer price index (CPI), p. 144
Inventories, p. 105 Underemployed, p. 120 Producer price index (PPI), p. 145
Investment spending, p. 106 Job search, p. 127 GDP deflator, p. 146

Problems

1. At right is a simplified circular-flow diagram for the Government purchases of
economy of Micronia. goods and services = $100
Government
a. What is the value of GDP in Micronia?
b.What is the value of net exports? Taxes = $100
c. What is the value of disposable income?
d.Does the total flow of money out of house- Households
Consumer Wages,
holds—the sum of taxes paid and consumer
spending = $650 profit,
spending—equal the total flow of money into interest,
households? rent = $750
e. How does the government of Micronia finance Markets for goods Factor
its purchases of goods and services? and services markets

Gross Wages, profit,
domestic interest,
product rent = $750
Firms

Exports = $20
Rest of world
Imports = $20

150 section 3 Measurement of Economic Performance