econ2010 final exam cheat sheet

# econ2010 final exam cheat sheet - g = real GDP p =...

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g = real GDP, p = population, h = per capita real GDP. Approx: h = g-p. Approx is good when g&p are small and close to 0. Exact: 1+h = 1+g/1+p. slope = rise/run or vert/ horiz. 2001 to 2002: (2002g/2001g) – 1 = g. (2002p/2001p) – 1 = p. x1 is period 1, x2 is period 2. growth rate of X from 1 to 2 is (x2/x1)-1. x2 = x1 [1+growth rate] Hit ceiling before equil = effective ceiling. C move from bottom to top. Hit floor before equil = effective floor. F move from top to bottom. Pc < Pe is effective price ceiling. Pc >= Pe is ineffective price ceiling. Effective price floor is Pf > Pe. Ineffective price floor is Pf =< Pe. Opp cost per unit Dec X / Inc Y. law of inc opp = OC/unit increases as output Q increases. Comparative advantage of w? Country A = 100,000b/200,000w = .5b/1w .5b per 1 unit w. .5b < TOT <.6b 2w> TOT > 1.5w. firm combines labor & capital inputs using prod tech to prod output. Per cap real gdp = real gdp / population. Growth rate of X from year 1 to year 2 is (x2/x1)-1. g<p is 1+h<1 is h<0 pop grows faster than real gdp. g>p is 1+h>1 is h>0 real gdp grows faster than pop. if net exports are negative, have a trade defecit. Effective points on PPC (pairs of outputs), ineffective points under PPC (wasteful/unemployment). Unattainable points = outside PPC. Productivity = production of labor. Terms of Trade (TOT) = rate at which goods are exchanged. TOT aka relative price. 1.) TAXATION: a.) Let f be the fraction of income paid in tax in a given tax program (e.g., U.S. income tax orU.S. Social Security tax). In equation form: f = total tax paid / income b.) A progressive tax program = one in which f rises as income rises. c.) A proportional tax program = one in which f remains constant as income changes. [Note: The program in (c) would be a true "flat tax" program.] d.) A regressive tax program = one in which f falls as income rises. 2.) REAL vs. NOMINAL GDP: Suppose the output of an economy consists of two goods, A and B. We also have two years, 1 and 2. a.) Year 1 nominal GDP =(Year 1 output of A )(Year 1 price of A) + (Year 1 output of B)(Year 1 price of B) Note that when calculating nominal GDP, the prices and output quantities we use are both from the same year. So, Year 2 nominal GDP =(Year 2 output of A )(Year 2 price of A) + (Year 2 output of B)(Year 2 price of B) b.) When calculating real GDP for a given year, we will still always use the output quantities of that year, but we will use the prices of the base year. So, for example, if we pick year 1 as the base year, we will have: Year 1 real GDP = Year 1 nominal GDP(real GDP always equals nominal GDP in the base year), and Year 2 real GDP = (Year 2 output of A)(Year 1 price of A) + (Year 2 output of B)(Year 1 price of B) c.) GDP deflator for a given year = nominal GDP for the same year / real GDP for the same year e.g., 2000 GDP deflator = 2000 nominal GDP / 2000 real GDP 3.) GDP, SPENDING AND INCOME: a.) I = The amount that firms spend on new capital + changes in inventories. NOTE: Changes in inventories include both desired and undesired changes in inventories.

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