Chapter 12 Review - Chapter 12 Product Markets and National...

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Chapter 12: Product Markets and National Output LEARNING OBJECTIVES Compare and contrast a barter and monetary economy. Describe the circular flow of payments for the product and resource markets in a monetary economy. Understand the composition and measurement of gross domestic product (GDP). Understand the difference between nominal (current dollar) and real (constant dollar) GDP. Differentiate between a durable good and a nondurable good. Understand the determinants of planned consumption and the marginal propensities to consume and save. Understand the determinants of aggregate investment expenditures in the economy. Graphically depict the equilibrium level of national income using the Keynesian cross. Derive the aggregate demand curve. Depict the ranges of the aggregate supply curve. Understand the concept of the full employment level of gross domestic product. Determine whether the economy is in a recessionary or inflationary gap and understand the consequences of each. CHAPTER SUMMARY The purpose of this chapter was to introduce the concept of general equilibrium, the relationship between sector output and GDP, and the physical and financial links between the farm business sector and the rest of the economy. The major points made in this chapter may be summarized as follows: 1. A partial equilibrium assumes other things remain unchanged. In many situations, however, it is necessary to take into account events taking place simultaneously in other markets. When we do this, we are focusing on a general equilibrium.
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