1 Problem Session I April 4th, 2014 Reference: Parkin, Introduction to economics, The rm that printed your Introduction to economics textbook bought the paper from XYZ Paper Mills. Was this purchase of paper part of GDP? If not, how does the value of the paper get counted in GDP? Solution:To calculate GDP, we value the nal goods and services produced. A nal good or service is an item that is bought by its nal user during a specied time period. It contrasts with an intermediate good or service, which is an item that is produced by one rm, bought by another rm, and used as a component of a nal good or service. In this case, paper is an intermediate good, which is used to "produce" your economics textbook. Therefore, the purchase of paper by the company that printed your book from the XYZ Paper Mills is not a part of GDP. If we were to add the value of intermediate goods and services produced to the value of nal goods and services, we would count the same thing many times-a problem called double counting. The value of the book already includes the value of the paper. 2. The circular ow model of an economy is given below. During 2008, in an economy: Flow C was 9 trillion dollars, Flow G was 2 trillion dollars, Flow I was 3 trillion dollars, Flow (X-M) was -0.7 trillion dollars. Name the ows and calculate the value of: Aggregate income 1
2 GDP Solution: The gure given in the problem illustrates the circular ow of expenditure and income. The economy consists of households, rms, governments, and the rest of the world, which trade in factor markets and goods (and service) markets. The ows among these can be enlisted as below: Y, is the aggregate income of the households, including the retained earnings. Households sell and rms buy the services of labor, capital, and land in factor markets. For these factor services, rms pay income to households: wages for labor services, interest for the use of capital, and rent for the use of land. A fourth factor of production, entrepreneurship, receives prot. Firms' retained earnings-prots that are not distributed to households- are part of the household income. You can think of retained earnings as being income that households save and lend back to rms.
3 Firms sell and households buy consumer goods and services in the goods market. The total payment for these goods and services is consumption expenditure, shown by the ow labeled C. Firms buy and sell new capital equipment in the goods market. Some of what rms produce is not sold but is added to inventory. When a rm adds unsold output to inventory, we can think of the rm as buying goods from itself. The purchase of new plant, equipment, and buildings and the additions to inventories are investment, shown as the ow labeled I. Governments buy goods and services from rms and their expenditure on goods and services called government expenditure, shown as the ow labeled G. Firms sell goods and services to the rest of the world- exports; and buy goods and services from the rest of the world- imports. The value of exports (X) minus the value of imports (M) is called net exports, shown as the ow (X-M). Aggregate income is equal to the total amount paid for the services of the factors of production used to produce nal goods and services -wages, interest, rent, and prot. Because rms pay out as incomes everything they receive from the sale of their output, aggregate income equals aggregate expenditure. Aggregate expenditure is the sum of consumption, investment, government expenditure and net exports. Therefore: Y=C+I+G+(X-M)=9+2+3+(- 0.7)=13.3 trillion dollars. GDP equals aggregate expenditure and equals aggregate income. Therefore GDP is also equal to 13.3 trillion dollars. 3. Use the following data. The BLS reported the following CPI data: June June June Calculate the ination rates for the years ended June 2007 and June Why might these CPI numbers be biased?
4 Solution: We calculate the ination rate as the annual percentage change in the CPI. To calculate the ination rate, we use the formula: We can use this formula to calculate the ination rate for the year ended June 2007: Ination Rate= 100 = 2.62% If we calculate the ination rate for the year ended June 2008: Ination Rate= 100 = 4.69 % The main sources of bias in the CPI are: New goods bias: Since a PC is more expansive than a typewriter was, the arrival of the PC puts and upward bias into the CPI. Quality change bias: Many goods get better every year. Part of the rise in prices of these items is a payment for improved quality and not ination. But the CPI counts the entire price as ination and so overstates the ination. Commodity substitution bias: Changes in relative prices lead consumers to change the items they buy. For example, if the price of beef increases and the price of chicken remains unchanged, people buy more chicken and less beef. The price of protein has not changed. But the CPI ignores the substitution of chicken for beef, it says the price of protein has increased. Outlet substitution bias: When confronted with higher prices, people use discount stores more frequently and convenience stores less frequently. This phenomenon is called outlet substitution. The CPI surveys do not monitor outlet substitutions.
5 4. Information regarding the output and prices in an economy for the last three years is depicted in the table below. Compute nominal GDP, real GDP and GDP deator for all three years, using 2011 as the base year. At what rate did the prices change during the period from the beginning of 2010 to the end of 2012? In real terms, how much did prosperity in the economy increase during 2012? What is the price level in 2011 and what is the rate of ination in 2010 measured by the GDP deator? Solution: Nominal GDP: Nominal GDP is the value of nal goods and services produced in a given year when valued at the prices of that year. Nominal GDP in 2010= (2 100) + (5 250) = = 1450 Nominal GDP in 2011= (4 200) + (8 400) = = 4000 Nominal GDP in 2012= (5 250)+(10 400) = = 5250 Real GDP:Real GDP is the value of nal goods and services produced in a given year when valued at the prices of a reference base year. Since 2011 is given as the base year, we can calculate the real GDP as follows:
6 Real GDP in 2010= (4 100) + (8 250) = = 2400 Real GDP in 2011= (4 200) + (8 400) = = 4000 (Since 2011 is the base year, nominal and real GDP's are the same) Real GDP in 2012= (4 250) + (8 400) = = 4200 GDP Deator can be found by using the following formula: Then GDP Deator can be calculated as follows: GDP Deator in 2010= = GDP Deator in 2010= = GDP Deator in 2010= = From the beginning of 2010 to the end of 2012, the rate of change in the prices can be found by the change in GDP deator: = % In order to measure the change of prosperity of the economy during 2012, we should nd at which rate the real GDP has changed in = = 5 % We can measure the ination rate in 2010 by nding the change in GDP deator from 2010 to 2011:
7 = % When should we expect GDP deator and CPI to be exactly identical? Solution:CPI measures the price of a certain basket of goods, that is intended to represent the consumption behavior of the consumers. Therefore, it only indicates the price change of the goods that an average consumer consumes. On the other hand, GDP includes all of the goods produced in the economy. Therefore, GDP deator indicates the price change of all of the goods and services that is produced in an economy. Hence, it is a more comprehensive measure of price than CPI. These two indices would be the same if CPI measures all of the goods and services that is produced in an economy, with exactly the same weights. 6. Brazil's real GDP was 1,360 trillion reais in 2009 and 1,434 trillion reais in Brazil's population was million in 2009 and million in Calculate The economic growth rate The growth rate of real GDP per person. The approximate number of years it takes for real GDP per person in Brazil to double if the 2010 economic growth rate and population growth rate are maintained. Solution: Growth Rate= 100 = 5.44 % 1360 Real GDP per capita in 2009= = 7101 $ Real GDP per capita in 2010= = 7418 $
8 Growth rate of GDP per capita in 2009= % = We should use the "70-rule" in order to nd the approximate doubling period of GDP: = years. 7. The following tables describe an economy's labor market and its production function in What are the equilibrium real wage rate, the quantity of labor employed in 2010, labor productivity, and potential GDP in 2010? In 2011, the population increases and labor hours supplied increase by 10 at each wage rate, labor productivity, and potential GDP in 2011?
9 In 2011, the population increases and labor hours supplied increase by 10 at each real wage rate. Does the standard of living in this economy increase in 2011? Explain why or why not? Solution: As you may remember, the equilibrium in the labor market occurs at the point where labor supply is equal to demand for labor. At the equilibrium, the real wage rate is also determined. Then the equilibrium quantity of labor determines the potential GDP of the economy. You can see these interactions in the gure below: According to this, we should nd the equilibrium quantity of labor
10 in the labor market rst. Examining the labor market schedule given, we can easily nd the equilibrium quantity of labor is 25 hours, at which point the labor supplied is equal to the demand for labor. And the real wage rate is 40 $/hour. Then from the production function, we can nd the potential real GDP of the economy, which is equal to 1625 $ (in 2005 dollars). Labor productivity is the quantity of real GDP produced by an hour of labor.then: Labor productivity in 2010= = 65 $/hour. If the population increases in 2011 and labor hours supplied increase by 10 at each real wage rate, then the labor market schedule
11 will be as follows: The potential GDP corresponding to this level of empoyment will be: Then we can calculate the new labor productivity as follows: = 60 $/hour. Population growth brings growth in the supply of labor, but it does not change the demand for labor or the production function. The economy can produce more output by using more labor, but the labor productivity falls. When labor productivity falls, real GDP per person decreases and brings a decrease in the standard of living. Therefore, in this case,
12 the rise in the real GDP of the overall economy, does not translate into the rise in the standard of living. 8. First Call,Inc., is a cellular phone company. It plans to build an assembly plant that costs 10 million dollars if the real interest rate is 6 percent a year. If the real interest rate is 5 percent a year, First Call will build a larger plant that costs 12 million dollar. And if the real interest rate is 7 percent a year, First Call will build a smaller plant that costs 8 million dollars. Draw a graph of First Call's demand for loanable funds curve. First Call expects its prot from the sale of cellular phones to double next year. If other things remain the same, explain how this increase in expected prot inuences First Call's demand for loanable funds. Draw a graph to illustrate how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged. Solution: The demand for loanable funds is the relationship between the quantity of loanable funds demanded and the real interest rate, when all other inuences on borrowing plans remain the same. First Call,Inc.'s demand for loanable funds curve can be depicted as in the gure below: When the expected prot changes, the demand for loanable funds changes. Other things remaining the same, the greater the expected prot from the new capital, the greater is the amount of investment and the greater the demand for loanable funds. If the demand for loanable funds curve shifts to the right. We can depict an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged as follows:
14 9. The following table shows an economy's demand for loanable funds and the supply of loanable funds schedules, when the government's budget is balanced. Suppose that the government has a budget surplus of 1 trillion dollar. What are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation?
15 Suppose that the government has a budget decit of 1 trillion dollar. What are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? Suppose that the government has a budget decit of 1 trillion and the Ricardo-Barro eect occurs. What are the real interest rate and the quantity of investment? Solution: Under current conditions,the equilibrium in the loanable funds market occurs when the loanable funds demanded equals the loanable funds supplied. Therefore, the equilibrium level of loanable funds is 7 trillion $ and the equilibrium real interest rate is 7. If the government has a budget surplus of 1 trillion dollars, then the supply of loanable funds increases at each real interest rate by 1 trillion dollars, which means the loanable funds supply curve shifts to the right. This means that the equilibrium real interest rate falls to 6 percent a year, the quantity of loanable funds increases to 7.5 trillion dollars per year, and investment is 7.5 trillion dollars a year. The fall in the interest rate decreases private saving to 6.5 trillion dollars, but investment increases to 7.5 trillion dollars, which is nanced by private saving plus the government budget surplus (government saving).
16 If the government has a budget decit of 1 trillion dollars, then the demand for loanable funds increases at each real interest rate by 1 trillion dollars, which means the demand for loanable funds curve shifts to the right. This means that the equilibrium interest rate increases to 8 percent per year. Ant the equilibrium quantity of loanable funds increases to 7.5 trillion dollars a year. The rise in the real interest rate increases private saving to 7.5
17 trillion dollars, but investment decreases to 6.5 trillion dollars, because 1 trillion dollar of private saving must nance the government budget decit. The tendency for a government decit to raise the real interest rate and decrease investment is called the crowding-out eect. In this case, the budget decit of the government crowds out investment by competing with businesses for scarce nancial capital.
18 Ricardo-Barro Eect means that government budget surplus or decit has no eect on real interest rate, or investment. Because, tax payers are rational. Decit today means that future taxes will be higher, and smaller future disposable income, saving increases today. Private saving and private supply of loanable funds increase to match the quantity of loanable funds demanded by the government. So the budget decit has no eect on the real interest rate or investment. 10. In June 2009, currency held by individuals and businesses was 853 billion dollars; traveller's checks were 5 billion dollars,; checkable deposits owned by individuals and businesses were 792 billion dollars; saving deposits were 4,472 billion dollars; time deposits were 1,281 billion dollars; and money market funds and other deposits were 968 billion dollars. Calculate M1 and M2 in June Solution: M1 and M2 are two ocial measures of money. M1 and M2 consist of the following components.
19 Then M1 and M2 can be calculated as follows: M1= = 1650 $ M2= = 8371 $ 11. The gure shows the demand for money curve. If the Fed decreases the quantity of real money supplied from 4 trillion
20 dollars to 3.9 trillion dollars, explain how the price of the bond will change. Solution: If Fed decreases the supply of money from 4 trillion dollars to 3.9 trillion dollars, the rate of interest rises from 4 percent to 6 percent. In order to do this, Fed will sell bonds with open market operations. This will increase the supply of bonds, and increased bond supply will result in a decrease in its price. 12. Quantecon is a country in which the quantity theory of money operates. In year 1, the economy is at full employment and real GDP is 400 million dollars, the price level is 200, and the velocity of circulation is 20. In year 2, the quantity of money increases by 20 percent. Calculate the quantity of money, the price level, real GDP, and the velocity of circulation in year 2. Solution: The quantity theory of money is the proposition that in the long run, an increase in the quantity theory of money brings an equal percentage increase in the price level. The equation of exchange tells us how Quantity of money (M), Velocity of circulation (V),Aggregate price level (P) and Real GDP (Y) are
21 connected. This equation is: MV = P Y If the quantity of money does not inuence the velocity of circulation or real GDP, then this equation becomes the quantity theory of money. In this case, the equation of exchange tells us that in the long run, the price level is determined by the quantity of money. That is, where (V/Y ) is independent of M. So a change in M brings a proportional change in P. In the problem given above, In year 1; M 1 V = P 1 Y M 1.20 = M 1 = 4000 In year 2; M increases %20. This means that M 2 = 1.2M 1 = 1, = 4800 Since the velocity of money, V=20 and real GDP=400 is constant in the short-run; = P P 2 = 240 Which means a proportional increase in the aggregate price level.
KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is
Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory
Econ 111 Summer 2007 Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The classical dichotomy allows us to explore economic growth
Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* The Demand for Topic: Influences on Holding 1) The quantity of money that people choose to hold depends on which of the following? I. The price
23 Finance, Saving, and Investment Learning Objectives The flows of funds through financial markets and the financial institutions Borrowing and lending decisions in financial markets Effects of government
Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment
EC201 Intermediate Macroeconomics EC201 Intermediate Macroeconomics Problem Set 1 Solution 1) Given the difference between Gross Domestic Product and Gross National Product for a given economy: a) Provide
, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers
CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like
Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services
Macroeconomics ECON 2204 Prof. Murphy Problem Set 2 Answers Chapter 4 #2, 3, 4, 5, 6, 7, and 9 (on pages 102-103) 2. a. When the Fed buys bonds, the dollars that it pays to the public for the bonds increase
Chapter 7 (19) GDP: Measuring Total Production and Income Chapter Summary While microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government
Unit 4 Test Review KEY Savings, Investment and the Financial System 1. What is a financial intermediary? Explain how each of the following fulfills that role: Financial Intermediary: Transforms funds into
Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40
Economics 152 Solution to Sample Midterm 2 N. Das PART 1 (84 POINTS): Answer the following 28 multiple choice questions on the scan sheet. Each question is worth 3 points. 1. If Congress passes legislation
EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each
CHAPTER 2 The Data of Macroeconomics Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN:... the meaning and measurement of the most important
chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product,
Chapter 6: The Price Level and Measuring the Price Level and Microeconomic causes changes in individual markets can explain only a tiny fraction of price change For the most part, price rises came about
Chapter 17 1. Inflation can be measured by the a. change in the consumer price index. b. percentage change in the consumer price index. c. percentage change in the price of a specific commodity. d. change
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How
Practiced Questions Chapter 20 1. The model of aggregate demand and aggregate supply a. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution
CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.
Chapter 2 The Measurement and Structure of the National Economy Multiple Choice Questions 1. The three approaches to measuring economic activity are the (a) cost, income, and expenditure approaches. (b)
Chapter 20 The Measurement of National Income In this chapter you will learn to 1. Use the concept of value added to solve the problem of double counting when measuring national income. 2. Describe the
Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and
, Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Final Exam 1. When the government spends more, the initial effect is that a. aggregate
Study Questions 5 (Money) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The functions of money are 1) A) medium of exchange, unit of account,
Macroeconomia Capitolo 7 Seguire l andamento della macroeconomia PowerPoint Slides by Can Erbil 2006 Worth Publishers, all rights reserved What you will learn in this chapter: How economists use aggregate
PRACTICE- Unit 6 AP Economics Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The term liquid asset means: A. that the asset is used in a barter exchange.
MEASURING GDP AND ECONOMIC GROWTH CHAPTER Objectives After studying this chapter, you will able to Define GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* Key Concepts The Demand for Money Four factors influence the demand for money: The price level An increase in the price level increases the nominal
Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal
The Keynesian Cross Some instructors like to develop a more detailed macroeconomic model than is presented in the textbook. This supplemental material provides a concise description of the Keynesian-cross
Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn
Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value
Name: _ Days/Times Class Meets: Today s Date: Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions Read these Instructions carefully! You must follow them exactly! I) On your Scantron card you
Problem Set for hapter 20(Multiple choices) 1. According to the theory of liquidity preference, a. if the interest rate is below the equilibrium level, then the quantity of money people want to hold is
Douglas, Fall 2009 September 29, 2009 A: Special Code 0000 21 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 2 Midterm 1 1. What will happen
2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
Econ 20B- Additional Problem Set 4 I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. 1. Institutions in the economy that help to match one person's
Chapter 2: Key Macroeconomics Variables ECON2 (Spring 20) 2 & 4.3.20 (Tutorial ) National income accounting Gross domestic product (GDP): The market value of all final goods and services produced within
Macro Exam 2 Self Test -- ANSWERS Dr. McGahagan WARNING -- Be sure to take the self-test before peeking at the answers. Chapter 8 -- Aggregate Expenditure and Equilibrium Output _FALSE 1. Firms react to
Chapter 12. Aggregate Expenditure and Output in the Short Run Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Aggregate Expenditure (AE)
Econ 102 Measuring National Income and Prices Solutions 1. Measurement of National Income and Decomposing GDP This question is designed to see if you understand how Gross Domestic Product (GDP) is measured.
NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY 1. NIPA: GNP and GDP 2. Saving and Wealth 3. Prices and Inflation 4. Unemployment 5. Problems with Measuring the Macroeconomy There are
Lecture 6 Economics 202 Principles Of Macroeconomics Measuring GDP Professor Yamin Ahmad Real GDP and the Price Level Economic Growth and Welfare Big Concepts Ways to Measure GDP Expenditure Approach Income
KrugmanMacro_SM_Ch14.qxp 10/27/05 3:25 PM Page 165 Monetary Policy 1. Go to the FOMC page of the Federal Reserve Board s website (http://www. federalreserve.gov/fomc/) to find the statement issued after
Practice Problems on NIPA and Key Prices 1- What are the three approaches to measuring economic activity? Why do they give the same answer? The three approaches to national income accounting are the product
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College firstname.lastname@example.org http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution
Introduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky Name Time: 2 hours Marks: 80 Multiple choice questions 1 mark each and a choice of 2 out of 3 short answer question
CONCEPT OF MACROECONOMICS Macroeconomics is the branch of economics that studies economic aggregates (grand totals):e.g. the overall level of prices, output and employment in the economy. If you want to
ECON 3312 Macroeconomics Exam 3 Fall 2014 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Everything else held constant, an increase in net
Part I. True/False/Uncertain Justify your answer with a short argument. 14.02 Principles of Macroeconomics Problem Set 1 Fall 2005 ***Solution*** Posted: Monday, September 12, 2005 Due: Wednesday, September
Practice Problems Mods 25, 28, 29 Multiple Choice Identify the choice that best completes the statement or answers the question. Scenario 25-1 First National Bank First National Bank has $80 million in
Chapter 5: GDP and Economic Growth Be Mean Green! Please consider the environment before printing this Chapter Outline. It ll be available online throughout the semester. For Firms private accounting measures
ECON 102 Spring 2014 Homework 3 Due March 26, 2014 1. For this problem, you need to download data about the country Badgerstan from the website: https://mywebspace.wisc.edu/mmorey/web/102data.xls The file
Macroeconomics ECON 2204 Prof. Murphy Problem Set 4 Answers Chapter 10 #1, 2, and 3 (on pages 308-309) 1. a. Interest-bearing checking accounts make holding money more attractive. This increases the demand
Pre-Test Chapter 10 ed17 Multiple Choice Questions 1. Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE 1 to AE 2 would: A. move the economy from
Study Questions 8 (Keynesian Model) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the Keynesian model of aggregate expenditure, real GDP is
Chapter 8. GDP : Measuring Total Production and Income Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Related Economic Terms Macroeconomics:
Chapter 10 1. For an economy as a whole, income must equal expenditure because a. the number of firms is equal to the number of households in an economy. b. individuals can only spend what they earn each
Topic 4: Different approaches to GDP PRINCIPLES OF MACROECONOMICS Dr. Fidel Gonzalez Department of Economics and Intl. Business Sam Houston State University Three different approaches to measure the GDP
Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,
Lab 17: Consumer and Producer Surplus Who benefits from rent controls? Who loses with price controls? How do taxes and subsidies affect the economy? Some of these questions can be analyzed using the concepts
Econ 201 Final Winter 2008 SOLUTIONS 1 Multiple Choice - 50 Points (In this section each question is worth 1 point) 1. Suppose a waiter deposits his cash tips into his savings account. As a result of only
The price level is the average level of prices and is measured by using a price index. The consumer price index, or CPI, measures the average level of the prices of goods and services consumed by an urban
Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a
A CLOSED ECONOMY IN THE LONG (MEDIUM) RUN For a closed economy, the national income identity is written as Y = C(Y T ) + I(r) + G the left hand side of the equation is the total supply of goods and services
Macroeconomics Topic 6: Explain how the Federal Reserve and the banking system create money (i.e., the supply of money) Explain the factors that affect the demand for money. Reference: Gregory Mankiw s
11.1 Estimating Gross Domestic Product (GDP) Objectives Describe what the gross domestic product measures. Learn two ways to calculate the gross domestic product, and explain why they are equivalent. 11.1
Economics 101 Quiz #1 Fall 2002 1. Assume that there are two goods, A and B. In 1996, Americans produced 20 units of A at a price of $10 and 40 units of B at a price of $50. In 2002, Americans produced
4 Macroeconomics LESSON 6 Interest Rates and Monetary Policy in the Short Run and the Long Run Introduction and Description This lesson explores the relationship between the nominal interest rate and the
ECON 3023 Hany Fahmy FAll, 2009 Lecture Note: Introduction and Basic Concepts A. GDP, Economic Growth, and Business Cycles A.1. Gross Domestic Product (GDP) de nition and measurement The Gross Domestic
Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Key Concepts Gross Domestic Product Gross domestic product, GDP, is the market value of all the final goods and services produced within in a country in a given
Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What
Lesson 3 - National Income Accounting Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section 1 - National Income Accounting History of National
20 Measuring GDP and Economic Growth After studying this chapter you will be able to Define GDP and explain why GDP equals aggregate expenditure and aggregate income Explain how Statistics Canada measures
Economics 2 Spring 2016 Professor Christina Romer Professor David Romer LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016 I. MACROECONOMICS VERSUS MICROECONOMICS II. REAL GDP A. Definition B.
Macroeconomics 2301 Potential questions and study guide for exam 2 Any 6 of these questions could be on your exam! 1. GDP is a key concept in Macroeconomics. a. What is the definition of GDP? b. List and
University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi CH 27 Expenditure Multipliers 1) Disposable income is A) aggregate income minus transfer
Chapter 3 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded.