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Economic Indicators & Business Cycles Topic 2.1- The Circular Flow and GDP Topic 2.2- Limitations of GDP 1. Define gross domestic product (GDP) 1. Identify three types of transactions that are not included in GDP. Give an example of each 2 . What is the expenditures approach ? 3. GDP = Identify if each statement is true or false: 4 . What is the income approach ? 2. On the circular flow model, businesses sell the factors of production to households . 3. Intermediate goods are used in the production process to produce final goods. 5. National Income = 4. Final goods are included in GDP but services are not 6. What is the value-added approach? counted . 5. Investment spending is spending on financial assets like stocks and bonds . 6. Welfare checks and subsidies to businesses are examples of transfer payments. 7. The circular flow model shows how households, 7 . Transfer payments are not counted in the calculation of businesses, and the interact. GDP. Businesses sell to households in the 8 . The equation for net exports is imports minus exports. market and households sell 9. New housing construction is considered investment and to businesses in the s counted in GDP. market. Public goods and services are provided by the 10. Canada's GDP includes goods produced in other countries by Canadian companies. Topic 2.3- Unemployment Use the info in the chart below to identify the following 6. Does the new unemployment rate after the increase in Total Adult Population 1600 discouraged workers overstate or understate the actual Full-time Workers 600 level of joblessness in the economy? Explain. Part-time Workers 120 Unemployed 80 Discouraged Workers 20 1 . Number of workers in labor force. 7. Why are discouraged workers not included in the 2 . Labor force participation rate. unemployment rate ? 3 . What is the equation for calculating the unemployment rate ? 8. What happens to the unemployment rate when full-time 4. Calculate the unemployment rate. workers involuntarily become part-time workers? 5. Assume that 50 of the 80 unemployed workers also become discouraged workers. Calculate the new unemployment rate