2.1 the levels of overall macroeconomic activety worksheet

Exercise one

The inner circle of the base diagram illustrates the economic links between households and firms. There is a flow of factors of production from households to firms and in, the opposite direction a flow of goods and services. from firms to households. These are considered real flows where as the other direction there is a money flow twhich refers to the incomes paid by firms to households for use of the factors supplied. the factors of producuction include land, labour, capital and entrepreneurship and their rewards or payemebnts are the sum of rent, wages interest and profits. GDP is a measure of the total output of an economy in a year. More specificaly it is the value of all final goods produced within the boundaries of an economy over a period of time, typicaly a year. nominal GDP meaures output at current prices ie. the price pravailing each year. Real GDP meaures output value at constant prices, ie prices prevailing during the base year, If the deleterious effect of many production production processes pon the enviroment is accounted for then we will arrive at the of green GDP. Using national income stats to make inferences about living is fraught with problem . for ecampls subsistence farming and non marketed output.

Exercise 2

There are many reasons that just because there is a double gdp that the standard of living is double. This is becasue there are several things that are not accounted for in the GDP such as un paid services thhat benifit the welfare. Also bigger countries proudce more then smaller countries bu may have different GDP per capita.

Exercise 3

It is importent becasue it monetizes the loss of biodiversity, and accounts for costs caused by climate change.

exercise 4

233.046/101.2x100

220

exercise 5

1. false

2. false

3. false

4. true

5. true

6. true