Econ Unit 5 FA Dummy 3, 2025-26

An economist explains that households provide labor to firms, which supply goods and pay wages in return. How does this exchange fit into economic models?

• It describes the Circular Flow Diagram

• It explains the Law of Demand

• It is an example of market failure

• It defines the consumer price index

A professor uses a diagram showing households, firms, and markets exchanging money and goods. What key economic concept does this diagram illustrate?

• Business Cycle

• Circular Flow Diagram

• Monetary Base

• National Debt

What term refers to the method of calculating GDP by adding total spending on final goods and services produced in an economy?

• Income Approach

• Expenditures Approach

• Production Approach

• Output Method

The Expenditures Approach is best defined as a way to find GDP by summing all spending on final goods and services in a country.

• A method that counts all income earned by workers

• A method adding total spending on final goods and services

• A way to calculate GDP by counting total production

• A method that includes only government spending

Which of the following best defines the Expenditures Approach?

• Adding wages, rents, and profits in an economy

• Summing up total spending on final products and services

• Measuring total output by firms

• Calculating GDP through investment alone

What is the term for the GDP calculation method based on totaling consumer, investment, government, and net export spending?

• Expenditures Approach

• Income Approach

• Production Function

• Capital Method

A study finds that consumer spending and government purchases both rose by 4% last year. Which GDP calculation method reflects this increase most directly?

• Income Approach

• Expenditures Approach

• Production Approach

• Employment Method

After a stimulus package boosts investment and consumption, which GDP measure best captures the overall rise in spending?

• Expenditures Approach

• Capital Stock Method

• Labor Input Approach

• Supply Chain Analysis

A country sees a decline in exports but a rise in consumer spending. Which GDP calculation method would show the net effect of these changes?

• Expenditures Approach

• Income Distribution Method

• Production Volume Calculation

• Fiscal Policy Review

An economist explains that summing up all spending categories, including imports subtracted from exports, gives a clear picture of GDP. What method is being described?

• Income Approach

• Expenditures Approach

• Capital Investment Method

• Resource Allocation Approach