ECONOMICS FINAL EXAM

ECONOMICS FINAL EXAM - ECONOMICS FINAL EXAM Chapters: 1, 2,...

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ECONOMICS FINAL EXAM Chapters: 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 14, (15), 19, 20, 21, 22, 24, 25, 26 HENRY FORD EXAMPLE NUMBERS (U.S.): inflation rate 2.4%, unemployment 4.5%, real growth Macroeconomics people are concerned with: o stable prices o unemployment o real growth o external balance Chapter 19: Business cycle – alternating periods of economic expansion and economic recession Consumption – spending by households on goods and services, not including spending on new houses Economic growth – the ability of an economy to produce increasing quantities of goods and services Expansion – the period of a business cycle during which total production and total employment are increasing Final good or service – a good or service purchased by a final user GDP deflator – a measure of the price level (nominal GDP / real GDP)(100) Government purchases – spending by federal, state and local governments of goods and services Gross domestic product (GDP) – the market value of all final goods and services produced in a country during a period of time Net exports – export minus imports Nominal GDP – the value of finals goods and services evaluated at current year prices Real GDP – the value of final goods and services evaluated at base year prices Recession – the period of a business cycle when total production and total employment are decreasing Transfer payments – payments by the government to individuals for which the government does not receive a good or service in return Underground economy – also know as the black market, buying and selling of goods and services that is concealed from the government to avoid taxes or regulations or because the goods and services are illegal Value added – the market value a firm adds to a product GDP = consumption + investment + government purchase + net exports Common abbreviations of above equation Y = C + I + G + NX Social security payments to retired and disabled people are examples of transfer payments Transfer payments are not included in GDP Financial systems allow firms to borrow money therefore the economy can grow
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Factors of production: labor, capital, natural resources and entrepreneurship GDP deflator inflation rate t = (GDP deflator t – GDP deflator t-1 / GDP deflator t-1 ) (100) Calculate GDP: Product Quantity Price per Unit Calculations Total Eye exams 100 $ 50.00 (100)(50) $ 5,000 Pizzas 80 $ 10.00 (80)(10) $ 800 Textbooks 20 $ 100.00 (20)(100) $ 2,000 Paper 2,000 $ 0.10 (2,000)(.10) $ 7,800 You exclude paper, because you only include final goods/service, paper in this specific example is an intermediate good (an input of the textbooks) Chapter 20: Inflation rate – the percentage increase in the price level from one year to the next Unemployment rate – the percentage of the labor force that is unemployed Consumer price index (CPI) – an average of the prices of the goods and services
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This note was uploaded on 04/21/2008 for the course ECO 001 taught by Professor Gunter during the Spring '06 term at Lehigh University .

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ECONOMICS FINAL EXAM - ECONOMICS FINAL EXAM Chapters: 1, 2,...

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