Question

1) Describe the Following term: “Capital”. Is it:

Price Level

Income

One component of Income

Inflation

None of the above

2) Describe the Following term: “Output”. Is it:

Price Level

Income

One component of Income

Inflation

None of the above

3) Describe the Following term: “Exports-Imports”. Is it:

Price Level

Income

One component of Income

Inflation

None of the above

4) Describe the Following term: “Current total value of all final goods and services produced”. Is it:

Price Level

Income

One component of Income

Inflation

None of the above

5) Describe the Following term: “Quantity of Money”. Is it:

Price Level

Income

One component of Income

Inflation

None of the above

Answer 1

1) In classical economics, capital is one of the four factors of production. The other factors are land, labor, and organization. Capital is a term for the financial asset. It is more durable and uses to generate wealth through investment. Therefore the fifth option is correct.

2) Economic output is the total value of goods and services produced in an economy. So it measures the income. Therefore the Second option is correct.

3) Export is the value of goods and services send outside the country and import is the value of goods and services brought in the country. So net export (Export-Import) generates income of the home country. GDP or income=Consumption+Investment+Government expenditure+Net export. Therefore the third option is correct.

4) GDP is the current total value of goods and services produced within the country. GDP is the income of the country so the second option is correct

5) Quantity of money determines the money supply in an economy. Money supply and price level are directly related. When the quantity of money increases the price level also increase and vice versa. The first option is correct.