Define GDP.
Gross Domestic Product. the total market value for all final goods and services produced annually within the borders of a country by domestic and foreign supplied resources.
In the GDP, the goods and services must have a ________________.
dollar value
The GDP measures _______________of the country.
overall production
Define GNP.
Gross National product. The total market value of all final goods and services produced by the nationals or citizens of a country annually.
What two ways can GDP be measured?
Using Income approach and the Expenditure(spending) approaches. If you count these, you will get both the same answers.
what is the difference between the GNP and the GDP?
The GNP uses GDP(which measures all the income earned within a country), but adds income from foreign sources, less income paid to foreign citizens and entities.
Name the 3 conceptual issues or measurement problems in national income accounting?
(1)GDP is a market value/ monetary measure. (2) ONLY final goods and services are counted. (3) No Second-hand sales or Purely financial transactions
Which is an example of a second-hand sale, in which CANNOT be included in the GDP?
A. Reselling your textbook at the end of a semester
B. Handmade Jewelry
C. Reselling a used aluminum baseball bat
D. A & C
D. A & C
What are the examples of a purely financial transaction that CANNOT be counted in the GDP, that were discussed in class?
public transfer payments, privates transfer payments, or buying and paying financial securities
National Income Accounting is defined as the
Measurement of aggregate economic activity.
National income accounts assist
Economic policy makers in formulating policies and evaluating performance.
Suppose Blu-Ray players cost consumers $300 and Blu-ray discs cost consumers $30. What contribution does the production of 250 blu-ray players and 3,000 Blu-Ray discs make to the GDP?
$165,000
Which of the following is EXCLUDED from calculations of GDP?
A. Goods that are produced but not sold during the time period.
B. Income received by the managers of corporations.
C. the value of lawn mowing provided by a teenager for his own family.
D. Good
C. the value of lawn mowing provided by a teenager for his own family.
If nominal GDP was $11,500 billion in 2003 and the price level in 2003 was 111.6, then real GDP would have been approximately
$10,305
Jack graduated from college last month, but he has not yet started looking for a job. Jack is
Not part of the labor force and is not counted in the unemployment rate.
For the labor force to definitely increase,
People must turn from being discouraged workers into people actively seeking employment.
Suppose that in a population of 50 million people, 40 million are in the labor force, 36 million are employed, 2 million are classified as unable to work, and 1 million are classified as unwilling to work. The unemployment rate is
10%
Suppose a student graduates from college with a civil engineering degree and is not employed to grade papers, answer the phone, and make copies----tasks that are below the graduate's capabilities. The graduate can best be classified as
underemployed
Inflation is
A. A rise in the price of every good but not any service.
B. An increase in relative prices of all goods and services.
C. A situation in which purchasing power increases.
D. An increase in the average level of prices of goods and services.
D. An increase in the average level of prices of goods and services.
what is the formula for Real income?
nominal/price level
If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000, your nominal income has
increased, and your real income has increased.
According to classical theory,
Flexible wages and prices allow a laissez faire economy to adjust wages and prices to shifts in aggregate demand.
Which of the following is true about business cycles in the United states?
They vary greatly in length, frequency, and intensity. NO business cycles are the same.
Given that C=$500 + 0.8Yd, if the level of disposable income is $1,000, the level of saving is
-300
If the disposable income increases from $9,000 billion to $11,000 billion, and consumption increases from $9,500 billion to $11,000 billion, the MPC must be
0.75
Suppose the consumption function is C= $200+0.85Yd. If disposable income is $400, consumption is
$540
Suppose a consumption function is given as C= $150+0.75Yd. The marginal propensity to save is
0.25
Formula for Real GDP
#NAME?
Formula for Price Index
#NAME?
Formula for Unemployment Rate
0
A decrease in the average level of prices of goods and services is
A. Deflation.
B. Recession.
C. Depression.
D. Inflation.
D. Inflation.
What is a discouraged worker?
An individual who isn't actively seeking a job, but if given one would take it
Formula for GDP Gap
#NAME?
Okun's Law
States that for every 1% unemployed, there is a 2% loss in the GDP(rate of output).
What does CPI stand for?
Consumer Price Index
What does the CPI measure?
The rate of inflation
What does PPI stand for?
Producer Price Index
What does the PPI keep track of?
average prices for producers
Formula for Real Income
#NAME?
What does ARM stand for?
Adjustable Rates Mortgage
Recession refers to:
Two consecutive sessions of decline in the economy
Net Export (Xn) =
Total Exports - Total Imports
Aggregate Demand (AD) curve slopes down because of...
(1)Real Balance Effect, (2) Interest Rate Effect, (3) Net Export/Foreign Effect
DI (Disposable Income) =
C + S
C (Consumption)=
DI - S
S (Savings)=
DI - C
APC (Average Propensity to Consume)=
Consumption / Disposable Income
APS (Average propensity to save)=
Savings / Disposable Income
MPC (Marginal Propensity to Consume)=
Change in Consumption / Change in Disposable Income
MPS (Marginal Propensity to Save)=
Change in Savings / Change in Disposable Income
Unemployment is defined as
A. The active search and inability of labor force participants to find jobs.
B. The active search and inability of citizens to find jobs that utilize their capabilities.
C. The proportion of the total population that is unemploy
A. The active search and inability of labor force participants to find jobs.
Suppose a student graduates from college with a civil engineering degree and is now employed to grade
papers, answer the phone, and make copies�tasks that are below the graduate's capabilities. The graduate can
best be classified as
A. A discouraged worke
D. Underemployed.
Formula for GDP
0
Formula for NDP
#NAME?
Formula for NI (National Income)
#NAME?
Formula for PI (Personal Income)
#NAME?
Formula for DI (Direct Income)
#NAME?
If the Price Index is over 100 (the base #)...
You are deflating it because it is already inflated (higher than the base #).
If the Price Index is below 100 (the base #)...
You are inflating it because it is already deflated (lower than the base #)