reviewsheet2fall2004 - ECON 102 FALL 2004 SECOND MIDTERM...

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E CON 102 F ALL 2004 – S ECOND M IDTERM This is not meant to be a complete list, but is instead a guideline of many of the topics covered. Professor Kelly reserves the right to question material that is not listed here, or that is found in your text but was not covered in the large lecture. Please review your notes carefully and work the practice questions. If you need additional questions, remember to check the website for help: . M ACROECONOMIC M EASUREMENTS General concepts Index numbers and base period measurement – Index numbers are a series of numbers used to track a variable’s rise or fall over time. They are based upon the concept of considering a certain year in the available data as a benchmark and measuring changes in the variable of interest with respect to the benchmark year. (e.g. See pg. 140 – 141 of Hall and Lieberman) Real vs. Nominal Variables – A nominal variable is measured in current prices while a real variable is measured in purchasing power or constant dollars. Measuring GDP Gross Domestic Product – the total value of all final goods and services produced for the market place during a given year, within the nation’s borders. GDP = consumption + private investment + government expenditure + (exports – imports) Measurement of GDP can be done using one of four methods: 1) The summation of price times quantity for each final good or service produced in an economy during a year; 2) The value added approach where one sums the value added at each stage of production in order to calculate GDP; 3) The factor payments approach, which sums the payments made to labor, capital, land, and entrepreneurs to calculate GDP; 4) The expenditure approach, which sums up spending by households, businesses, government, and the foreign sector to calculate GDP. Circular Flow Diagram – a chart showing the monetary and real flows (or transactions) between households and firms.
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Measuring Inflation Consumer Price Index – an index constructed, from year to year, using a basket of consumer goods, targeting on measuring aggregate price changes in consumer goods and services. See the Appendix to Chapter 6 in Hall and Lieberman for CPI computation. Measuring and Categorizing Unemployment The Labor force – the group of people in the economy who are actively working or looking for a job. The Unemployment Rate
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This note was uploaded on 08/08/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at Wisconsin.

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reviewsheet2fall2004 - ECON 102 FALL 2004 SECOND MIDTERM...

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