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BM1101 Business Economics (PRD2 A 2024/25)

BM1101 Business Economics (PRD2 A 2024/25)

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Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP?

it reduces GDP by $12,000

it raises GDP by $250,000

it does not change GDP

✅

it raises GDP by $238,000

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In a simple circular-flow diagram, firms use the money they get from a sale to

pay rent to landlords.

pay wages to workers.

pay profit to the firms' owners.

All of the above are correct.

✅

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According to the circular-flow diagram GDP

can be computed as expenditures on final goods and services, but not as the total income paid by firms.

cannot be computed as either total income paid by firms or expenditures on final goods and services.

can be computed as the total income paid by firms or as expenditures on final goods and services.

✅

can be computed as the total income paid by firms, but not as expenditures on final goods and services.

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The phenomenon of scarcity stems from the fact that

governments restrict production of too many goods and services.

resources are limited.

100%

most economies' production methods are not very good.

in most economies, wealthy people consume disproportionate quantities of goods and services.

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Figure 4-17

Refer to Figure 4-17. At a price of

$5, there is a shortage of $25.

$7, there is a surplus of 4 units.

$5, there is a surplus of 25 units.

$2, there is a surplus of 6 units.

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