MankiwReviewTest3 - Mankiw Review Test 3 GDP Chapter 10 1...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Mankiw Review Test 3 GDP Chapter 10 1. Circular Flow Diagram – relationship between total income and total expenditures - Assumptions - Households- own all the resources - Spend all of the income - Buy all of the goods and services - Firms - Pay wages, etc. 2. Definition of Gross Domestic Product – measures total income of everyone in the economy and measures the total expenditure on the economy’s output of goods and services. - Income must equal expenditure 3. Calculation of GDP : GDP = C + I + G + (X - M) GDP = private consumption + gross investment + government investment + government spending + (exports - imports(net exports)). Exports minus imports is the same thing as net exports 4. Definition of final vs. intermediate goods : Final goods are what is sold to the consumer and intermediate goods are what is sold the the producer. I.e. tires being sold to a car manufacturer, but the entire car (including the tires) is sold to the consumer. What is calculated is the worth of the final good. 5. What’s included/excluded from GDP : Goods that are produced domestically are excluded from GDP and/or anything that was produced illegally. Only final goods are included so intermediate goods aren’t... 6. Definition of disposable income: income remaining after deduction of taxes and other mandatory charges, available to be spent or saved as one wishes. 7. Differentiate and calculate nominal and real GDP: The formula for real GDP is nominal GDP divided by the deflator, or Real = Nominal/D. - For example, if prices rose 2.5% since the base year, the deflator is 1.025. If the nominal GDP were 10 million, the real GDP would be 976,000 or 10,000,000/1.025 = 976,000.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern