ECO 251 - HW1 Questions
1. The opportunity cost would be $5 in interest over 1 year
100 = Winnings
x .05 = interest
2. The minimum price the bus company should charge could be $1. There are no marginal costs for this
trip, so any amount of money is bett
ECO 252 - CHAPTER 7: Production and Growth
Standard of living is measured by real GDP per person or real GDP per capita
= real GDP/ number of persons
Productivity is measured as the amount of goods and services produced for each hour of a workers time.
ECO 252 - CHAPTER 5: Measuring a Nations Income
Definition of GDP:
Market value of all final goods and services produced within a country in a given period of time.
Every word in this definition is important!
Market value: Prices are in dollars and the
ECO 252 - CHAPTER 8: Saving, Investment, and the Financial System
Know the difference between financial markets (stock and bond markets) and financial intermediaries
(banks and mutual funds). Also know what a bond is, and what stock is.
Medium of exchan
ECO 252 - CHAPTER 10: Unemployment.
This chapter focuses on the natural rate of unemployment. Definition is on p. 196.
In the economy there is ALWAYS some unemployment so that the unemployment rate is never zero!
Terminology: Probably more than you need
ECO 252 - CHAPTER 15: Aggregate Demand and Aggregate Supply.
To understand this chapter and my notes it would be easier to read first about the Theory of Liquidity
Preference in the next chapter p. 359-363. I also cover this theory in my notes on chapte
ECO 252 - CHAPTER 4: The Market Forces of Supply and Demand
You will notice that in my homework I use the term Ceteris Paribus. This term is Latin for All Else
Equal or Other Things Constant.
This term simply means that if you are analyz
ECO 252 - CHAPTER 11: The Monetary System
Functions of MONEY in the U.S.:
medium of exchange. We use money (dollars) to buy goods and services.
unit of account. Prices are expressed in terms of dollars. When you go shopping you do not see
ECO 252 - CHAPTER 16: The Influence of Monetary and Fiscal Policy on
Theory of Liquidity Preference
Because we are now in the SR, we have economic fluctuations: the economy is NOT at Y fe and the
unemployment rate is NOT at its natural
ECO 252 - CHAPTER 6: Measuring the Cost of Living
Consumer Price Index: CPI
Go through the calculations from Table 1 on p. 115. You need to do something similar in the homework.
To calculate the inflation rate, use the formula on p. 116 and your answer
ECO 252 - CHAPTER 13: Open-Economy Macroeconomics: Basic Concepts
This chapter deals with an open economy so that Y = C + I + G + NX, where NX stands for net exports.
NX is defined as exports minus imports.
For the U.S.: NX = exports by the U.S. imports
ECO 252 - CHAPTER 17: The Short-Run Trade-off between Inflation and
The Phillips Curve
You can read about the origins of the Phillips curve in the book. The Phillips curve illustrates a negative
relationship between unemployment and inflati
ECO 252 - CHAPTER 12: Money Growth and Inflation
This chapter looks at how changes in the money supply affects the price level in the long run.
In the long run, an increase in the money supply will cause inflation (i.e. the price level increases). This