Worksheet 2 - Answer Key

Worksheet 2 - Answer Key - Spring 2010 Introductory...

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Spring 2010 – Introductory Macroeconomics – Econ 104a,c,d,e,f - Voorheis Answer Key Economics 104 A, D,E Worksheet 2 – GDP.inflation.origins of macroeconomics For discussion sections 9/28 and 9/29/2006 1. What are the important dates and issues that started the modern study of macroeconomics? 1929: Stock Market Crash 1930-1932: 9000 US Banks Fail 1933: 25% US Unemployment, World Depression 1933: Federal Deposit Insurance Corporation founded 1935: Social Security created 1936: John Maynard Keynes writes The General Theory of Unemployment 1940’s: WWI, Recovery of Economy 1946: Employment Act (From Day 2 Class Notes) 2. What is the difference between real and nominal GDP? Why is this important? Nominal GDP is the total dollar value of all final goods and services produce in a year, in the current year’s dollars. Real GDP is adjusted for changes in prices, measuring GDP in the prices of a base year. The difference is important because we need Real GDP in order to compare how much was produced from one year to another, without the distortion of inflation. (From Day 3 notes and textbook pg 328) 3. What is the Consumer Price Index? What was the inflation rate for the month of August? What was it for the previous 12 months? Name 2 ways the CPI is used. The Consumer Price Index (CPI) measures the current prices of a “basket” of about 400 ‘typical’ consumer goods and services as a percentage of the cost of that same ‘basket’ in some base year. It tells
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