ECONOMICS
Gross Domestic Product - Ch 12
1) Even though economists can calculate GDP accurately, it is still not a perfect yard stick. GDP does not take into
account certain economic activities. What are the limitations of the GDP?

Non Market activities

Underground economy

Negative externalities

Quality of life
2)
Gross
National
________
Product
________
Gross
Domestic
Product
Gross National
Product
_________
Net National
_________
Product
Net National
Product
National
_________
Income
_________
Personal
Income
_________
National
Income
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Personal
Income
_________
Disposable
Personal
_________
Income
3) How does gross domestic product (GDP) differ from gross national product?
GDP is the dollar value of all final goods and services produced within a country’s national borders in a
given year. GNP is the annual income earned by U.S. owned firms and residents.
4) Which phase of the business cycle can lead an economy into recession? Contraction
5) How can interest rates push a business cycle into contractions?
If interest rates rise too high, consumers will stop purchasing “big ticket” items, and businesses will not be
able to afford to borrow the money they need in order to invest in their plants and equipment. Output will fall,
a situation that marks the start of a contraction.
6) Why is the stock market considered to be a leading indicator of economic change?
The stock market has historically given advance notice of a new phase of the business cycle. Typically it
turns sharply downward a short time before a recession begins.
7) What is capital deepening, and how does it contributor to economic growth?
It involves increasing the amount of capital per worker. Workers who have more capital to work with are
likely to be more productive and will therefore contribute to economic growth.
8) What role does saving play in the process of economic growth?
It may be used by firms for business investment (loaned by banks) contributing to economic growth.
9) How do patents encourage technological progress?
They give investors sole rights to produce and sell their newly invented goods, providing economic incentive
to be creative and thus contributing to technological progress.
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1. Fill in (1 point each OR Perfect score = FREE FINAL)
Investment
Financial Intermediaries
What is the art of redirecting resources from being
consumed today for benefits in the future?
What are institutions that channel money
from savers to borrowers?
Mutual Funds
Diversification
What pools the savings of many individuals and invests in
variety of stocks, bonds and other financial assets??
What is a strategy of spreading out investments to reduce risks?
Portfolio
Prospectus
What is a collection of financial assets?
What is an investment report showing
an intermediary’s performance to investors?
Return
Coupon Rate
What is money an investor receives above and
beyond the sum of money initially invested?
What is an interest rate that the bond issuer
will pay to the stockholder?
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Money Market
Maturity
What is the time at which payment to the bondholder is due?
What is a market that lends money for periods less than a year?
Par Value
Yield
What is an amount an investor pays to purchase a bond
and that will be repaid back at maturity?
What is the annual rate of return on a bond if held to maturity?
Capital Market
Share
Stocks are known also
as equities:
claims of ownership in
a corporation
What is a market that lends money for
periods longer than a year?
What is portion of stock?
Capital Gain
Stock Split
Difference
between a higher selling price
and
a lower purchased price
What is a division of a single share of stock
into more than one share?
What is a financial gain for the seller?
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Capital Loss
Stockbroker
What is a financial loss for the seller?
Who is a person who links buyers and sellers of stock?
Stock Exchange
Brokerage Firm
Where stocks are bought and sold?
What is a business that specializes in trading stocks?
OTC Market
S & P 500
Over The Counter
Market
What is an electronic marketplace for stocks and bonds?
What is the index that shows
the price changes of 500 different stocks?
The DOW
Speculation
What is the index that shows how certain stocks have traded?
What is the practice of making high-risk investments with
borrowed money in hopes of getting a big return?
Since 1896
Represents 30 large
companies in various
industries
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Bear Market
Bull Market
What type of market shows stocks falling for a period of time?
What type of market shows stocks rising steadily
over a period of time?
Week 4 of 9.
The 4th quiz towards your final.
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