Prelim 1 Equations

Question 1

Economic Surplus

Answer 1

Marginal Benefit - Marginal Cost

Question 2

Consumer Surplus

Answer 2

Marginal Benefit - Price

Question 3

Producer Surplus

Answer 3

Price - Marginal Cost

Question 4

Opportunity Cost of Chosen X

Answer 4

Y Not Chosen Value / X Chosen Value

Question 5

Comparative Advantage

Answer 5

Lowest Opportunity Cost

Question 6

Consumer Surplus + Producer Surplus + Deadweight Loss

Answer 6

Triangle from graph

Question 7

GDP (Spending)

Answer 7

Y = CIGNX (GDP = Consumption, Investment, Government, Net Export)

Question 8

Net Export

Answer 8

Export - Import

Question 9

GDP (Output)

Answer 9

Sum of Value Added = Total Sales - Cost of intermediate Inputs

Question 10

GDP (Income)

Answer 10

Total Wages + Total Profits = Gross Domestic Income

Question 11

Nominal GDP

Answer 11

P x Q (all of current year)

Question 12

Real GDP

Answer 12

P (of base year or constant avg) x Q (of current year)

Question 13

% Change in Real GDP

Answer 13

% Change in Nominal GDP - % Change in prices

Question 14

Rule of 70

Answer 14

Year it takes something to double = 70 / Annual Growth Rate

Question 15

Inflation Rate

Answer 15

100* (Price Level this year - Price Level Base Year) / (Price level Base Year)

Question 16

CPI (t)

Answer 16

(Cost of Basket in year t / Cost of Basket in base year)*100
- NOTE USE SAME QUANTITY FROM BASE YEAR

Question 17

Basket Cost

Answer 17

P * Q (same quantities as base year)

Question 18

GDP Deflator

Answer 18

Nominal GDP / Real GDP

Question 19

Real Value (inflation)

Answer 19

Nominal Value year t * (Price Level Base year/ Price level base year t )

Question 20

% Change in Real Value

Answer 20

% Change in Nominal Value - % Change in Price