GDP, Ordering Quantity Flashcards
GDP formula:
GDP = C + G + I + (X-M)
What does the I in GDP formula stand for?
Investment by Business on Plant and Equipment
What does the G in GDP formula stand for?
Government Spending (federal + state + municipal)
What % of GDP is consumer spending in the USA?
~70%
Nominal GDP is also called
Current GDP
Nominal GDP is….
the current amount of goods and services * current price of goods and services
Real GDP is also called
Constant GDP
Constant GDP =
current amounts of goods and services * base year price of goods and services
Real GDP means….
GDP without distorting factor of inflation
The base year used for prices had “normal” economic conditions (no high inflation or recession)
Potential GDP reflects
if everyone in society works at 100% capacity, including factories
How long does ____ GDP need to decrease in order to quality an economy as being in a recession?
REAL
2 consecutive quarters > so 6 straight months
Inflation is measured by the
CPI
The CPI is an imaginary basket of….
184 goods and services that an average family of 4 uses
If the CPI increased by 0.7% last month, what is the projected annual inflation rate?
0.7% * 12 months = 8.4%
What is the Fed’s target rate of inflation
2%
Who was the chair of the council of president’s economic advisors under George HW Bush who defended that country was not technically in a recession
Dr Michael Boskin
What is the trade balance $ in the US
-$1 trillion (more imports than exports)
3 Main functions of the FOMC
- establish reserve requirement
- establish discount rate
- buy/sell government securities
Excess Reserve =
Amount of money you deposit - reserve requirement
The amount of cushion needed as a % over the amount in a deposit/checking account is
the reserve requirement
