CH 1-2 Economic Performance and Goals

Question 1

exogenous

Answer 1

Variable that a model takes as given (input)

Question 2

endogenous

Answer 2

variable that a model tries to explain (output)

Question 3

Macroeconomics is the study of..

Answer 3

the economy as a whole, growth in incomes, changes in prices and rate of unemployment

Question 4

GDP

Answer 4

Total income of everyone in the economy
-OR-
total expenditure on the economy’s output of goods and services

Y=C+I+G+NX

Question 5

The accounting system to measure GDP and many related statistics

Answer 5

National Income Accounting

Question 6

GNP

Answer 6

Gross National Product- Market value of goods and services earned by the citizens of the country regardless of where production occured

Question 7

GNP- Depredciation=

Answer 7

Net National Product

Question 8

How do you get National Income

Answer 8

GDP
\+factor payments from ROW
-Factor Payments to ROW
=GNP
-Depreciation
=NNP
\+/- Statistical Discrepency
-Indirect Business Tax
= NATIONAL INCOME YAY!

Question 9

GDP Expenditure Approach

Answer 9

C+G+I+NX

Consumption, Government Spending, Investment, Net Export

Question 10

3 Aspects of C

Answer 10

(Households)Durable Goods, Non-Durable Goods and Services

Question 11

3 Aspects of I

Answer 11

(Gross Private Domestic Investment) Business Investment, Residential Investment, Changes in Inventory

Question 12

What is G

Answer 12

(Government purchased Goods and Services) Federal, State and Local. !!Does not include Xfer Payments!!

Question 13

NX

Answer 13

Net Exports-Net Imports

Question 14

GDP Deflator=

Answer 14

Nominal GDP/Real GDP

Question 15

Real GDP

Answer 15

GDP calculated at a base year price and current quantity

Question 16

What is CPI?

Answer 16

Consumer Price Index- commonly used measure of the level of prices

Question 17

How do you calculate CPI?

Answer 17

CPI= 5x Current Price A + 6x Current Price B/ 5x Base Year Price A + 6x Base Year Price B

Question 18

Difference between GDP Deflator and CPI?

Answer 18

CPI is only things bought by CONSUMERS. GDP Deflator measure all G&S produced

Question 19

Labor Force

Answer 19

= Number of Employed + Number of Unemployed

Question 20

Unemployement Rate=

Answer 20

Unemployed/ Labor FOrce x100

Question 21

Long Term Unemployment Trend

Answer 21

General trend was increasing LF participation (due to baby boomers) until last decade where it has decreased sharply and hit a low since ‘78

Question 22

Labor Force Participation Rate

Answer 22

Labor Force/ Working Age

Question 23

Nominal GDP

Answer 23

GDP at current prices and quantities

Question 24

Value Added

Answer 24

Value of Output- Value of Intermediate Goods

Question 25

GDP Income Approach

Answer 25

Wages
\+Rent
\+Interest
\+Corporate Profit
\+Prop. Income

Question 26

Disposable Personal Income

Answer 26

Consumption + Personal Savings = DPI