Lecture 2

Question 1

Circular Flow Model

Answer 1

Demonstrates how money, goods, and services flow between households and businesses in a market economy

Question 2

GDP (expenditure approach)

Answer 2

GDP=C+I+G+X-M
GDP=C+I+G+NX

Question 3

Gross Domestic Product

Answer 3

Total dollar value of all FINAL goods and services within the border of an economy within the specific timeframe (typically quarterly)

Question 4

GDP (product approach)

Answer 4

Summation of P*Q

Question 5

GDP (income approach)

Answer 5

labor income + capital income + corporate profits + interest

Question 6

Nominal GDP

Answer 6

$ value at the current market year

Question 7

Real GDP

Answer 7

$ value at the base year

Question 8

Which is better, real GDP or nominal GDP?

Answer 8

Real GDP is better because it is the weighted growth average of the economy of each industry

Question 9

GDP Deflator

Answer 9

nominal GDP/real GDP * 100

Question 10

Inflation rate

Answer 10

% change in price level
% change NGDP - % change RGDP