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Comm 308 > ECON 200 > Flashcards

ECON 200 Flashcards

Final Exam

1
Q

What is GDP?

A

Gross Domestic Product. (GDP)

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2
Q

What does GDP measure?

A

Measures the market value of finished goods and services produced within a country.

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3
Q

How is GDP calculated?

A

Y (GDP) = C (consumption) + I (investment) + G (government purchases) + NX (net exports)

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4
Q

What does the C in the calculation of GDP represent?

A

Consumptions

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5
Q

Will a transaction count towards GDP?

A

unofficial transactions do not count towards GDP.

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6
Q

What is Nominal GDP?

A

Nominal GDP is calculated using currency year price. (not adjusted for inflation)

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7
Q

What is real GDP?

A

Real GDP is calculated with base years. (adjusted for inflation)

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8
Q

Does GDP really capture the wellbeing or quality of life?

A

Not directly

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9
Q

What is CPI?

A

Consumer Price Index

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10
Q

What does CPI measure?

A

A fixed basket of goods and services.

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11
Q

What does CPI consist of?

A

Prices of all goods and services purchased for consumption by urban households.

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12
Q

What is the CPI calculation when given a basket of goods?

A

CPI in year t = CPI this year - CPI last year / CPI last year *100

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13
Q

What is the CPI calculation of inflation rate when given CPI’s?

A

Inflation rate = CPI this year - CPI last year / CPI last year *100

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14
Q

What is hyperinflation?

A

Extremely high inflation. (always bad)

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15
Q

Is there a short run tradeoff between inflation and unemployment?

A

Yes

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16
Q

What is the unemployment rate?

A

UE Rate = Number unemployed / Number in labor force *100
(UE Rate is never 0)

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17
Q

What is the labor force product rate?

A

LFPR = Number in labor force / Number in population *100

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18
Q

What is cyclical unemployment?

A

The deviation of unemployment from its natural rate.

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19
Q

What types of unemployment make up the natural rate?

A

Structural and Frictional

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20
Q

What is the natural rate of unemployment?

A

Natural Rate of UE: Frictional + Structural

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21
Q

What is an example of frictional unemployment?

A

Searching for a job but unemployed.

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22
Q

What is an example of structural unemployment?

A

Waiting for employment but still unemployed or the wages are too high for employment.

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23
Q

What is fiscal policy?

A

Government spending and/or taxes

24
Q

What is expansionary fiscal policy?

A

Increases Aggregate Demand which is typically done during recessions and increases government spending. This can lead to higher inflation.

25
Q

Who conducts fiscal policy?

A

The president and congress.

26
Q

What does it mean for the government to have a balanced budget?

A

When government spending = government revenue comes from taxes

27
Q

What is monetary policy?

A

Interest rates/money supply, maximize employment without trying to get zero unemployment, stabilize prices, and control long-term interest rates

28
Q

Who conducts monetary policy?

A

The Fed

29
Q

What is contractionary monetary policy?

A

Raise interest rates or decrease money supply

30
Q

What tools can the Federal reserve use to influence the monetary supply?

A

Interest rate setting and open market operations

31
Q

What should happen to inflation when the Federal reserve increases interest rates?

A

Slow the economy and bring inflation down.

32
Q

What is fractional reserve banking?

A

You deposit money in a bank, and then the bank uses some of your money to make a loan to someone who wants to buy a house

33
Q

Does inflation matter over very long periods of time (in the long run)?

A

No

34
Q

What is the reserve rate?

A

The minimum number of reserves that banks must hold (set by the Fed)

35
Q

What measure of domestic product best captures the standard of living for the people living in a country?

A

Real GDP per capita

36
Q

Inflation refers to a

A

Sustained increase in the prices of all goods and services

37
Q

What is the unemployment rate if there are 135 people employed, 15 people unemployed, and 250 people living in a country?

A

10%

38
Q

Unemployed workers are

A

Not working but actively looking for work

39
Q

The federal reserve is responsible for

A

conducting monetary policy, supervising banks, and stabilizing financial markets

40
Q

All of the following are included in GDP except

A

unemployment insurance

41
Q

The CPI is sometimes thought to overstate inflation because it

A

is slow to include new goods, misses improvements in the quality of goods, and neglects substitution among goods when relative price changes.

42
Q

When the Fed raises interest rates, this is an example of

A

contractionary monetary policy

43
Q

The economy goes into a recession, and Betty gets laid off. It takes her a long time to find a new job because the economy is in a recession and many firms are not hiring new workers. This is an example of

A

cyclical unemployment

44
Q

Suppose, Ken land has a basket of goods priced at $3 in 2018, the base year. In 2019, the same basket is priced at $5. What is the consumer price index for 2019?

A

166.7

45
Q

Suppose Ken land has a CPI of 200 in year 2015 and 300 in year 2016. What is the inflation rate for 2016?

A

50%

46
Q

Generally, inflation does matter in the long run?

A

False

47
Q

When a government decreases spending on goods and services, its fiscal policy is

A

Contractionary

48
Q

Which of the following is NOT a tool the Fed can use to influence the money supply?

A

Automatic stabilizers

49
Q

The Fed increasing the money supply is an example of

A

Expansionary monetary policy

50
Q

What does the I in GDP mean?

A

Investment

51
Q

When taxes are equal to government spending, this results in a

A

balanced budget

52
Q

Which of the following is NOT included in GDP

A

Direct measures of quality of life and wellbeing

53
Q

Nominal GDP is adjusted for inflation

A

False

54
Q

Real GDP is adjusted for inflation

A

True

55
Q

Monetary policy in the United States is directed by Congress

A

False

56
Q

What type of unemployment refers to wages being above equilibrium?

A

Structural

Comm 308 (3 decks)

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