Goods market

Question 1

How can GDP be measured?

Answer 1

Production - value of all goods and services produced. Income - earned by factors.
Expenditure - on final goods and services

Question 2

Whats the difference between nominal and real GDP?

Answer 2

Nominal - value of GDP at current price.
Real - value of GDP at constant/base price - adjusted for inflation.

Question 3

What is the formula for GDP deflator? And what does it measure?

Answer 3

Nominal GDP/Real GDP.
Measures broad inflation

Question 4

How can countries compare GDP?

Answer 4

Convert GDP into other currency and use PPP based exchange rates.

Question 5

What does GDP not account for?

Answer 5

Black markets, depreciation of capital and resources, welfare, household tasks, GNI

Question 6

In the SR, what affects output? What is assumed about price? What policies will be effective?

Answer 6

Demand, fixed, fiscal and monetary.

Question 7

What is consumption equal to?

Answer 7

Autonomous consumption + Marginal propensity to consume as a function of disposable income

Question 8

How to work out the multiplier effect?

Answer 8

1/1-MPC

Question 9

What is autonomous spending?

Answer 9

Autonomous consumption + investment + government spending - taxation.
It is the demand for goods that doesn’t depend on income.

Question 10

What is private saving vs public saving?

Answer 10

Private = disposable income - consumption
Public = Tax revenue - government spending