Midterm 1 Flashcards
To convert any currency to USD
use purchasing power parity (PPP)
WHY use PPP adjusted exchange rates?
because market exchange rates are very volatile
expenditure components of GDP
consumption, C
investment, I
government spending, G
net esports, NX
Investment (I)
includes
- business fixed investment : spending on business structure, equipment, intellectual property
- residential fixed investment : spending by consumers and landlord on housing units
- inventory investment : the change in the value of all firms’ inventories
GDP
The value of all final goods and services domestically produced
nominal gdp
measures the values using current prices
real gdp
measure these values in constant prices, using the prices of a base year
Inflation rate
the percentage increase in the
overall level of prices, P
GDP deflator
Measures the current level of
prices relative to the level of prices in the base
year
Gross National Product (GNP)
total income earned by the nation’s factors of
production, regardless of where they are
located
(GNP – GDP) =
(factor payments from abroad)– (factor payments to abroad)
Break-even investment
the amount of investment necessary to keep k constant
sy* = (δ + n)k*
The Malthusian Model
Predicts population growth will outstrip the Earth’s ability to produce food, leading to the
impoverishment of humanity
