Describe in the context of the circular flow model

Subject: Economics / General Economics circular flow model

(Some of these questions can best be answered using http://research.stlouisfed.org/fred2/)

In the context of the circular flow, how does the government sector influence the nation’s output?

How do imports and exports influence the nation’s output? Describe in the context of the circular flow model.

What is present value and how is it used to determine investments? What is the internal rate of return and how is it used in the investment process?

In the national income and product accounts (NIPA), there are four major (and measured) components of national output (C+I+G+X). Name and describe these four components. What are the relative shares of each component for 2000? For the latest year that is available?

Define both Gross National Product and Gross Domestic Product. What is the difference between these two Products? Which is larger for the latest quarterly release? Why is it important to evaluate each in real (inflation adjusted) terms?

It is important to understand the periodicity of economic variables. A daily indicator generally becomes a weekly or monthly variable, however it is difficult for a quarterly indicator to become weekly. Name, describe, and explain why you chose each of the variables:

Two daily economic indicators. Why do youconsider each one of them important?

Two monthly economic indicators. Why do you consider each one of them important?

Two quarterly economic indicators. Why do you consider each one of them important?

How do we measure national unemployment? What is (are) the official definition(s)? Is a housewife included in the measurement? Is a student? What about the underemployed?

What is an interest rate? What is the difference between a nominal and real interest rate. Are real interest rates ever negative? If so, what are the implications of negative interest rates?

What is productivity? According to Mankiw, what are productivity’s four major determinants (list and define)?

What is a production function? What is the law of diminishing returns and how do diminishing returns relate to the production function?

What are the pros and cons of direct investment? In relation to jobs, what are the implications for US investment abroad? Should the US encourage foreign investment within or borders?

What is national savings? How is it defined in our national accounts (Y=C+I+G+X), particularly in relation to investment? How do we compute the savings rate and how does our savings rate impact capital investment?

In relation to the Federal Government, define the budget surplus and the national debt. Then relate them to each other. How does the surplus or debt relate to the level of national investment (for roads, bridges, etc.).

Define the market for loanable funds.

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