ECO 1102 Lecture Notes - Lecture 3: Capital Market, Subprime Mortgage Crisis, Prime Rate

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8 Mar 2017

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Most indicative indicator of the economy is the real gdp (+ is good growth rate) Part of the real (production, exchange, and consumption of tangible goods and services) economy. Consists of concrete, tangible goods and services. More economic activity takes the form of services as opposed to goods. Gross domestic product, the $ value of all final goods and services produced over a given interval (intermediate goods such as coal are not included in the final gdp) P is the composite price level (p has to be estimated) Inflation rate measures the % change in the price level over time. Unemployment rate is one measure of employment conditions. Wage inflation rate measures the change in the wage level over time. A worker is not a part of the real economy until he or she actually begins to work and produces something useful. Land market, capital market, output market are all part of the real economy.

Related Questions

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

1. Gross Domestic Product equals the :
total output of all goods and services produced by resourceslocated in the U.S.
market value of all goods and services produced by resourceslocated in the U.S.
market value of all final goods and services produced by resourceslocated in the U.S.
value added to the economy by intermediate goods and services minusoriginal cost

2. Which of the following is not considered a component ofinvestment when calculating GDP?
new residential construction
construction of new factories
net increases in inventory
purchases of corporate stock

3. Which is true of leakages and injections in the circularflow?
Leakages minus injections equal GDP.
Injections minus leakages equal GDP.
Leakages minus injections equal zero in equilibrium.
Domestic leakages must equal domestic injections.

4. Because of activity in the underground economy,
GDP statistics understate the true volume of economicactivity
GDP statistics overstate the true prices in the economy
consumers are not as well off as GDP statistics indicate
firms' profits are higher than GDP statistics indicate

5. The consumer price index measures changes in
the prices of all goods and services
the prices of goods that are sold
the total cost of a specific market basket of consumer goods andservices
the total costs of all goods and services

6. The unemployment rate is the
percentage of people in the economy who do not hold jobs
percentage of the labor force that does not have a job
number of people in the economy who have given up looking foremployment
number of people in the labor force without jobs

7. Which of the following people would be classified asunemployed?
a person who wants a job as a fashion model but cannot find work inthat field
someone who quits a part-time job to attend school full-time
someone who gives up looking for a job
a person who works at a job that underemploys his or herskills

8. Frictional unemployment refers to unemployment that resultsfrom
a mismatch of skills
being in the wrong geographical location
taking the time to find the best job
seasonal decreases in demand for labor

9. If the aggregate demand curve shifts rightward,
the price level increases and output decreases
the resulting increase in the price level is usually calledcost-push inflation
the resulting increase in the price level is usually calleddemand-pull inflation
the price level increases only if there is also a leftward shift ofthe aggregate supply curve

10. The Consumer Price Index measures the cost of
all goods and services produced in the U.S. economy
all goods produced in the U.S. economy
a fixed market basket of consumer goods and services produced inthe U.S. economy
a fixed market basket of producer goods and services

1. In the actual economy, households

a. spend all of their income.

b. divide their income among spending, taxes, and saving.

c. buy all goods and services produced in the economy.

d. Both (a) and (c) are correct.

2. Gross domestic product is defined as

a. the quantity of all final goods and services demanded within a country in a given period of time.

b. the quantity of all final goods and services supplied within a country in a given period of time.

c. the market value of all final goods and services produced within a country in a given period of time.

d. Both (a) and (b) are correct.

3. GDP adds together many different kinds of products into a single measure of the value of economic activity by using prices determined by

a. banks.

b. economists.

c. the government.

d. markets.

4. Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

a. caused measured GDP to fall.

b. not caused any change in measured GDP.

c. caused measured GDP to rise.

d. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

5. A steel company sells some steel to a bicycle company for $150. The bicycle company uses steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

a. $150 to GDP.

b. $250 to GDP.

c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

d. $400 to GDP.

6. The total sales of all firms in the economy for a year

a. equals GDP for the year.

b. is larger than GDP for the year.

c. is smaller than GDP for the year.

d. Any of the above is possible.

7. GDP is equal to

a. the market value of all final goods and services produced within a country in a given period of time.

b. Y.

c. C + I + G + NX.

d. All of the above are correct.

8. The consumption component of GDP includes spending on

a. durable goods and nondurable goods, but not spending on services.

b. durable goods and services, but not spending on nondurable goods.

c. nondurable goods and services, but not spending on durable goods.

d. durable goods, nondurable goods, and services.

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ECO 1102 Lecture Notes - Lecture 3: Capital Market, Subprime Mortgage Crisis, Prime Rate

ECO 1102 Full Course Notes

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