GDP Flashcards
Give the relationship between Real, nominal GDP and GDP deflator.
Rgdp = Ngdp / (GDP deflator / 100)
What is formula for Rgdp growth rate?
Current Rgdp / Base Year GDP
What is the two-factor production function?
Y = A * F(L,K)
What is the only attributable factor to potential GDP growth?
Total Factor Productivity
In practice, what is the best estimate of the growth rate of the economy?
Growth rate of the labor force + changes in labor productivity.
What are the two expenditure approaches to calculating GDP?
Sum-of-value-add method and final output method.
Describe the GDP growth rate and inflation rate for these four periods: early expansion, late expansion, peak and contraction?
(GDP, inflation): Early (modest growth, moderate to falling), Late (accelerating, modest increase), Peak (decelerating, accelerating), Contraction (negative, moderate to falling).
What is the formula for the income approach to GDP?
GDP = National Income + Capital Consumption Allowance
What goes into National Income?
Employee Compensation, Pre-tax corporate profits, Net income of unincorporated businesses, Interest Income, Rent, Indirect business taxes (less subsidies).
What does the Capital Consumption Allowance reflect?
The depreciation of the economy’s existing capital stock.
Why can increases in govt. debt be a good thing?
Increases in govt. debt can lead to economic growth if the debt is put towards under-utilized resources.
Why would high levels of government debt matter?
Could lead to higher taxes, could decrease confidence in govt. and could crowd out private borrowers.
What are the 4 forces that act on aggregate demand?
Consumer spending, government policy, business spending, international considerations (domestic currency exchange value and/or global economic growth).
How do declines in strength of domestic currency lead to increases in AD?
currency decline = more expensive imports = more consumption domestically.
What factors influence SRAS?
Input costs, natural resources, physical capital stock, labor supply/productivity, taxes/subsidies, domestic currency (decline = left shift), expectation of future prices (lower = left shift).
