Econ final study - Econ 200 Final Study Guide Page 1 STUDY GUIDE FOR ECON FINAL Macroeconomics Study of the economy as a whole A Economic Growth a

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Econ 200 Final Study Guide, Page 1 STUDY GUIDE FOR ECON FINAL Macroeconomics:   Study of the economy as a whole A. Economic Growth a. Definiton:  Expansion in national output measured by the annual percentage increase in a nations real GDP. It is  one of the nations economic goals because it increases our standard of living creating a bigger economic pie. b. Gross Domestic Product (GDP):  during a  period of time. Approximately 15 T in the US. c. Included in GDP:  1. Only new domestic production  2.  Only final goods d. Not Included in GDP:  1. Production abroad by US businesses 2. Second hand transactions 3. Nonproductive financial transactions e. Formula for GDP GDP = C + I + G + (X-M) - Personal Consumption Expenditures (C) Total spending by households for durable goods, nondurable goods and services. - Gross Private Domestic Investment (I) Business spending on plant, equipment and inventory - Government Consumption Expenditures and Gross Investment (G) Includes the value of goods and services government at all levels purchases measured by their costs. Does not  include government transfer payments, welfare, food stamps…. - Net Exports (X-M) Exports - Imports Exports (X) are expenditures by foreigners for US goods produced domestically Imports (M) are the dollar amount of goods produced abroad.  f. Business Cycle:  Alternating periods of economic growth and contraction,  which can be measured by changes in real GDP. It has 4  phases: 1. Peak: real GDP reaches its maximum after rising during  a recovery 2. Recession: downturn during which real GDP declines  and unemployment rate rises  3. Trough: real GDP reaches its minimum after falling  during a recession 4. Recovery: upturn during which real GDP rises (also  called expansion) g. Circular Flow Model: Shows that an economy’s income = output It is a diagram showing the flow of products from businesses to households and the flow of resources from  households to businesses. In exchange for these resources, money payments flow between businesses and  households. 
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Econ 200 Final Study Guide, Page 2 h. Measuring GDP: a. Income method It is the national income accounting method that measured GDP by adding all incomes, including  compensation of employees, rents, net interest and profits.  Formula for GDP GDP = employee compensation + rents + profits + net interest + indirect taxes + depreciation b. Expenditure method It is the national income accounting method that measures GDP by adding all the spending for final goods  during a period of time.  GDP = C + I + G + (X-M)
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This note was uploaded on 04/02/2008 for the course ECON 200 taught by Professor Cramer during the Fall '07 term at University of Arizona- Tucson.

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Econ final study - Econ 200 Final Study Guide Page 1 STUDY GUIDE FOR ECON FINAL Macroeconomics Study of the economy as a whole A Economic Growth a

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