Economics 111 Exam 2 questions and
answers graded A+
Aggregate Demand - correct answer ✔✔the total amount that all consumers, business firms,
government agencies, and foreigners spend on final goods and services
Consumer Expenditure (C) - correct answer ✔✔is the total amount spent by consumers on
newly produced goods and services (excluding: purchases of new homes, which are considered
investment goods)
Investment Spending (I) - correct answer ✔✔is the sum of expenditures of business firms on
new plants, equipment, software and households on new homes. Financial "investments" are
NOT included and neither are resales of existing physical assests
Government Purchases (G) - correct answer ✔✔refer to the goods (such as airplanes and paper
clips) and services (such as school teaching and police protection) purchased by all levels of
government
Net Exports (X-IM) - correct answer ✔✔is the difference between exports (X) and imports (IM).
It indicated the difference between what we sell to foreigners and what we buy from them
The Pruzick's build an addition on their house ... - correct answer ✔✔** investment spending
**
Emily paints a landscape and sells it to an art collector in Italy ... - correct answer ✔✔** net
exports **
, Emily builds a new BMW, which was assembled in Germany ... - correct answer ✔✔**
consumer expenditure / net imports **
The state of PA repaved a highway which runs through the center of PA ... - correct answer
✔✔** government purchases **
Emily gets a haircut ... - correct answer ✔✔** consumer expenditure **
National Income - correct answer ✔✔sum of all incomes that all individuals in the economy
earn in forms of wages, interest, rents and profits. Excludes government transfer payments and
is calculated before any deductions are taken for income taxes.
Disposable Income (DI) - correct answer ✔✔is the sum of all incomes of individuals in the
economy after all taxes have been deducted and all transfer payments have been added
[ DI = y - NT ]
Aggregate Demand is the Sum of : - correct answer ✔✔C + I + G + ( X - IM )
Injections into the Circular Flow Diagram - correct answer ✔✔investment, government
purchases, money received by selling goods to the rest of the world
Leakages into the Circular Flow Diagram - correct answer ✔✔saving, net taxes, and money paid
for goods produced in the rest of the world
What make up Aggregate Demand? - correct answer ✔✔consumer expenditure ( C )
investment spending ( I )
government purchases ( G )
net exports ( X - IM )
answers graded A+
Aggregate Demand - correct answer ✔✔the total amount that all consumers, business firms,
government agencies, and foreigners spend on final goods and services
Consumer Expenditure (C) - correct answer ✔✔is the total amount spent by consumers on
newly produced goods and services (excluding: purchases of new homes, which are considered
investment goods)
Investment Spending (I) - correct answer ✔✔is the sum of expenditures of business firms on
new plants, equipment, software and households on new homes. Financial "investments" are
NOT included and neither are resales of existing physical assests
Government Purchases (G) - correct answer ✔✔refer to the goods (such as airplanes and paper
clips) and services (such as school teaching and police protection) purchased by all levels of
government
Net Exports (X-IM) - correct answer ✔✔is the difference between exports (X) and imports (IM).
It indicated the difference between what we sell to foreigners and what we buy from them
The Pruzick's build an addition on their house ... - correct answer ✔✔** investment spending
**
Emily paints a landscape and sells it to an art collector in Italy ... - correct answer ✔✔** net
exports **
, Emily builds a new BMW, which was assembled in Germany ... - correct answer ✔✔**
consumer expenditure / net imports **
The state of PA repaved a highway which runs through the center of PA ... - correct answer
✔✔** government purchases **
Emily gets a haircut ... - correct answer ✔✔** consumer expenditure **
National Income - correct answer ✔✔sum of all incomes that all individuals in the economy
earn in forms of wages, interest, rents and profits. Excludes government transfer payments and
is calculated before any deductions are taken for income taxes.
Disposable Income (DI) - correct answer ✔✔is the sum of all incomes of individuals in the
economy after all taxes have been deducted and all transfer payments have been added
[ DI = y - NT ]
Aggregate Demand is the Sum of : - correct answer ✔✔C + I + G + ( X - IM )
Injections into the Circular Flow Diagram - correct answer ✔✔investment, government
purchases, money received by selling goods to the rest of the world
Leakages into the Circular Flow Diagram - correct answer ✔✔saving, net taxes, and money paid
for goods produced in the rest of the world
What make up Aggregate Demand? - correct answer ✔✔consumer expenditure ( C )
investment spending ( I )
government purchases ( G )
net exports ( X - IM )
