In: Economics
_____Replacement tires sold at a car dealership
_____Shoelaces included with a pair of shoes
_____Ice cream
_____Sprinkles for ice cream bought at the store
2. Suppose that the government purchases $50 million worth of computers from China. Which of the following GDP accounts will be affected?
_______Consumption |
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_______Investment |
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_______Government Purchases |
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_______Net Exports |
3. Economic ____________ (growth/development) is the process by which a country's GDP increases over time, and it is caused by investments in _________ (human/physical) capital. Economic ___________(growth/development) is the process by which a country's standards of living increase over time, and it is caused by investments in __________ (human/physical) capital such as health and education. However, no country experiences economic __________ (growth/development) without first having economic ____________ (growth/development)
I .FINAL GOODS:
Goods (and services) that are available for purchase by their ultimate or intended user with no plans for further physical transformation or as inputs in the production of other goods. Gross domestic product seeks to measure the market value of final goods. Final goods, also termed final goods and services, are purchased through product markets by the four macroeconomic sectors (household, business, government, and foreign) as consumption expenditures, investment expenditures, government purchases, and exports. Final goods, which are closely related to the term current production, do not include intermediate goods--goods (and services) that will be processed further before reaching their ultimate user.
For example, a cotton shirt is a final good, but cotton textile (fabric) is an intermediate good.
In the given question the answer is the fourth one , sprinkles for icecream bought at the store.
Intermediate goods
Intermediate goods are the inputs or components used in the production of other goods. They will be further processed before sold as final goods. The nut sprinkles, whipped cream, and maraschino cherry are also intermediate goods when purchased by the Hot Mamma Fudge Bananarama Ice Cream Shoppe.
Replacement tires sold at a car dealership, Shoelaces included with a pair of shoes, Ice cream are all final goods because these are not further used for production.
II . Gross domestic product (GDP)
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period. GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) is arguably more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on the international market.
GDP can be determined in three ways, all of which should, theoretically, give the same result. They are the production (or output or value added) approach, the income approach, or the speculated expenditure approach.
The most direct of the three is the production approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers", colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.
Expenditure approach
The third way to estimate GDP is to calculate the sum of the final uses of goods and services (all uses except intermediate consumption) measured in purchasers' prices.
Market goods that are produced are purchased by someone. In the case where a good is produced and unsold, the standard accounting convention is that the producer has bought the good from themselves. Therefore, measuring the total expenditure used to buy things is a way of measuring production. This is known as the expenditure method of calculating GDP.
Components of GDP by expenditure
GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).
Y = C + I + G + (X − M)
Here is a description of each GDP component:
The answer of the question is the fourth one , Net exports
Net Exports = Exports -Imports [ X -M ].
Note that C, G, and I are expenditures on final goods and services; expenditures on intermediate goods and services do not count. (Intermediate goods and services are those used by businesses to produce other goods and services within the accounting year).
III . Economic growth is the process by which a country's GDP increases over time, and it is caused by investments in human capital. Economic development is the process by which a country's standards of living increase over time, and it is caused by investments in human capital such as health and education. However, no country experiences economic development without first having economic growth.
Economic growth means an increase in real national income / national output. Economic development means an improvement in the quality of life and living standards, e.g. measures of literacy, life-expectancy and health care. Ceteris paribus, we would expect economic growth to enable more economic development.
Economic Growth is a narrower concept than economic development.It is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country's GDP (gross domestic product).
Economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.It implies an increase in the per capita income of every citizen.
Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming.
Economic growth is a necessary but not sufficient condition of economic development.