Macroeconomics

Question 1

GDP

Answer 1

Gross Domestic Product

Question 2

What is GDP?

Answer 2

measure of all final goods and services produced in a specific time period by a country

Question 3

GDP includes:

Answer 3

consumptions, investment, government purchases and net exports

Question 4

GDP does not include:

Answer 4

financial transactions (stocks and bonds), transfer payments from private/public, second-hand sales, values of work done outside the market

Question 5

final goods

Answer 5

final product ready for sale

Question 6

intermediate goods

Answer 6

used to produce final goods

Question 7

How to calculate GDP:

Answer 7

consumption + investment + government purchases + net exports

Question 8

Investments when calculating GDP include:

Answer 8

purchase of new capital goods (business equipment, new commercial real estate, residential housing and inventories

Question 9

What is disposable personal income?

Answer 9

after-tax income

Question 10

Disposable personal income is important because:

Answer 10

it shows us how consumers save, spend and borrow

Question 11

What is economic growth?

Answer 11

the increase in good/services produced over a time period

Question 12

How does economic growth look on a graph?

Answer 12

upward slope

Question 13

What causes economic growth?

Answer 13

growth in the size of the work force and growth in productivity of the work force

Question 14

What is real GDP per capita?

Answer 14

it measures the total economic output of a country divided by the number of people and adjusted for inflation

Question 15

How to calculate real GDP per capita:

Answer 15

GDP of country/population

Question 16

Growth Rate:

Answer 16

New-Old/Old x 100

Question 17

Rule of 70:

Answer 17

the number of years it takes for a country’s economy to double in size to equal to 70 divided by the growth rate in percent ex: growth rate 1% –> 70/1= 70 “how many years would it take?”

Question 18

What are business cycles?

Answer 18

intervals of expansion and recession in economic activity

Question 19

Four Phases of the business cycle:

Answer 19

Peak (max econ. activity), Recession (contraction), Trough (bottoms out), Recovery/Expansion (increasing output (GDP)/Employment

Question 20

How do business cycles affect GDP?

Answer 20

GDP falls during a recession; direct relationship

Question 21

Who decides when there is a recession?

Answer 21

National Bureau of Economic Research, board of 7 economists

Question 22

Facts about the Great Recession

Answer 22

Began Dec. 2007 and ended June 2009, the longest recession (18 months) and most severe since the Great Depression

Question 23

How to calculate unemployment:

Answer 23

of unemployed/labor force x 100

Question 24

Three types of unemployment:

Answer 24

structural (change in tech/industry), cyclical (result of recession), and frictional (temporary)

Question 25

Labor Force Participation Rate:

Answer 25

labor force/working-age population x 100

Question 26

"discouraged workers"

Answer 26

those who were unemployed and stopped looking for another job; are not counted

Question 27

"unemployed"

Answer 27

without a job but actively looking for one

Question 28

Full employment

Answer 28

those with a job, including part-time workers and underemployed workers (all included in U6 rate)

Question 29

"natural rate"

Answer 29

full employment

Question 30

What is inflation?

Answer 30

an increase in prices of goods/services during a period of time

Question 31

CPI

Answer 31

consumer price index; calculates inflation/deflation; inflation is the percent change in CPI

Question 32

How to calculate CPI

Answer 32

(# in current year/# in base year) x 100 (base year=100)

Question 33

Adjust for inflation

Answer 33

current CPI/earlier CPI x 100

Question 34

Who is impacted by inflation?

Answer 34

fixed-income receivers, savers, creditors

Question 35

Who is not impacted by inflation?

Answer 35

flexible income receivers, debtors

Question 36

Shoe-leather costs

Answer 36

time spent trying to spend money before it loses value

Question 37

Money Illusion

Answer 37

think nominal prices are real

Question 38

Menu costs

Answer 38

costs you have to incur when you change prices

Question 39

Nominal Values

Answer 39

the current price and does not adjust for inflation

Question 40

Real Values

Question 41

How to calculate real values out of nominal values: