Final Exam Study Guide

Final Exam Study Guide - Final Exam Study Guide The format...

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Final Exam Study Guide 05/03/2016 The format is 50 multiple choice questions; it is worth a total of 200 points (or 20% of the course grade). The questions are the type you've seen on the quizzes. There is a bonus section of 30 questions. It can add up to 10 points to your grade. Please bring a calculator for it. ° -Go over learning goals for each section, go through old quizzes, use quizlet to memorize terms, look over practice quizzes, reread textbook or readings needed for each section -Readings for section 1 -Finish notes for section 5 -Go over quizzes and practice quizzes -Quizlet flashcards

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Section 1 05/03/2016 ° Learning Goals Be able to calculate real and nominal GDP and explain what they measure. This includes related terms like capital, intermediate goods, and investment. (Ch. 8.1 & 8.3 and notes) o GDP : total production in the economy and is sometimes used as a measure of well-being; all production, all spending, all income in an economy; can measure by production, expenditures, or income and get the same value Production : GDP for a nation’s economy is the market value of all final goods and services produced domestically in that year Expenditures : C + I + G + NX Income : “Gross Domestic Income,” Limits : underground economy, household items o Nominal GDP is calculated by summing the current values of final goods and services; current dollar GDP This is seen more often than real – real is used to compare o Real GDP is calculated by designating a particular year as the base year and then using the prices of goods and services in the base year to calculate the value of goods and services in all other years; used to track the economy; constant dollar GDP/chained GDP **Real GDP holds prices constant which makes it better than nominal. Growth in the economy is almost always measured as growth in real GDP** o Capital (K) : manufactured goods owned by firms to produce other services/goods; ex: machines, factory, computer, hammer o Investment (I): purchase of capital goods, addition of inventory by businesses, purchase of a new house/apartment; ex: buying a new house o Intermediate good : used or transformed during the production process; ex: flour for bread o Final good : purchased by the final user; ex: bread Be able to explain (i) what fiscal and monetary policy are, (ii) how they influence the economy, and (iii) how they are currently being used in the U.S. This includes numbers for federal expenditures, taxes, debt, and deficit. (notes) o Fiscal policy : involves the government changing tax rates and levels of government spending to influence aggregate demand in the economy Changes in federal expenditures and taxes (independently)
Controlled by the President and Congress Government budget deficit = federal expenditures – federal taxes Borrowing (deficit) pays for any expenditures not covered by taxes Federal debt = accumulated deficits o Monetary policy : involves changing the interest rate and influencing the money supply (M1 and M2) Conducted by the Fed  largely independent of the

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