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CAS EC 102 Lecture Notes - Lecture 3: Root Mean Square

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pearshark711
29 Jan 2019
School
Boston University
Department
Economics
Course
CAS EC 102
Professor
Bruce Watson

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CAS EC 102 Lecture Notes - Lecture 2: Gross Domestic Product, Final Good

3

CAS EC 102 Lecture Notes - Lecture 3: Root Mean Square

4

CAS EC 102 Lecture 4: CPI, Inflation and Interest Rates

Document Summary

Gross domestic product(gdp), the most fundamental concept macro concept. Gdp is the market value of all nal goods and services produced within a country in a year. Final goods and service = cost of wheat to miller+cost of our to baker+cost of loaf to retailers. Calculated by the bureau of economic analysis - a division of the dept. of. Issue the nipa - national income and product accounts. Calculated gdp by adding up the value of expenditures on all nal goods and services in the economy. Investment means the purchase of business for commercial builds. To measure overall economic activity, the bea measure the amount of money that households, rms, the government and foreigners spend on goods and services. But that amount is equal to the amount of wages, interest payment, rent and pro ts received by households and rms, i. e. national income. Therefore, we can use the terms gdp and national income interchangeably.

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Related Questions

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

1. Which of the following transactions would add to the value of the U.S. GDP?

A. A college student buys a used car.
B. A college student sells her used textbooks back to the bookstore.
C. A grocery store purchases new freezers made in the United States.

D. U.S. citizen buys a new television manufactured in Asia.

2. The growth rate of real GDP:
A. depends on which year is used as the base year.
B. depends on how quickly prices are rising.
C. is always equal to the rate of growth of nominal GDP. D. is always more than the rate of growth of nominal GDP.

3. Which statement is true about GDP?
A. GDP includes the values of all final and intermediate goods and services.
B. Only the products made by American workers are included in the calculation of the US GDP.

C. Sales of old houses and used cars are included in the calculation of GDP for the current year.

D. In the US, GDP is calculated both annually and quarterly.

4. Which statement is true about GDP growth?
A. The GDP deflator is a measure of economic growth.
B. If we want to compare GDP over time, we should always compare real GDP.
C. Most economists choose nominal GDP growth as a single indicator of economic performance.

D. The GDP deflator tells the quantity change of production.

5. Which of the following is a way to compute GDP?

A. add up the wages paid to all workers

B. add up the quantities of all final goods and services
C. add up the market value of all final goods and services

D. add up the rents paid by all tenants

6. A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called:
A. inventory goods
B. transitory goods

C. final goods
D. intermediate goods

7. Martin, a US citizen, travels to Mexico and buys a newly manufactured motorcycle there. His purchase is included in:

A. both Mexican GDP and US GDP.

B. Mexican GDP, but not in US GDP.

C. US GDP, but not in Mexican GDP.

D. neither Mexican GDP nor US GDP.

8. Which of the following is included in Singapore GDP?

A. The value of production by a Singaporean working in the US.
B. The value of production by an American working in Singapore.
C. The value of production by a Singaporean that crosses the order to work in Malaysia.

D. All of the above are correct.

9. In the equation Y = C + I + G + NX,
A. Y represents the economy's total expenditure.

B. C represents household on durable goods.
C. all of the variables are always positive numbers.

D. All of the above are correct.

10. Consumption consists of spending by households on goods and services, except

purchases of intangible services.

purchases of durable goods.

purchases of new houses.

spending on education.

11. Which of the following is included in government purchase?

A. unemployment benefits a state government pays

B. social security payments the US government makes
C. the services of a US government attorney valued at the cost of her salary

D. All of the above are correct.

12. Transfer payments are:

A. included in GDP because they represent income to individuals.
B. included in GDP because they eventually will be spent on consumption.
C. not included in GDP because they are not payments for currently produced goods or services.

D. not included in GDP because taxes will have to be raised to pay for them.

13. Net exports equal
A. exports plus imports

B. exports minus imports

C. imports minus exports

D.GDP minus imports

14. In the economy of TAMIU in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was TAMIU's consumption in 2015?

A. $830

B. $1230

C. $1370

D. $1770

15. Nominal GDP will increase when

A. prices increase and output increases.
B. prices increase and output decreases.
C. prices decrease and output increases.

D. All of the above are correct.

16. Changes in real GDP reflect:

A. only changes in prices.

B. only changes in the amounts being produced.
C. both changes in prices and changes in the amounts being produced.

D. neither changes in prices nor changes in the amounts being produced.

17. Which of the following is correct?
A. Nominal GDP is always less than real GDP.

B. Nominal GDP is always greater than real GDP.
C. Nominal GDP equals real GDP in the base year.
D. Nominal GDP equals real GDP in all years but the base year.

18. The GDP deflator is the ratio of:

A. real GDP to nominal GDP.

B. real GDP to the inflation rate.
C. real GDP to nominal GDP.
D. nominal GDP to the inflation rate.

19. In 2012 the nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
A. $6.7 billion
B. $10 billion

C. $40 billion D. $100 billion

20. In the base year, the GDP deflator is always equal to A. -1
B. 0
C. 2

D. 1

21. GDP does not reflect:

A. the value of leisure.

B. the value of goods and services produced at home.

C. the quality of the environment.
D. All of the above are correct.

22. When economists talk about growth in the economy, they measure that growth as the:

A. absolute change in nominal GDP from one period to another.

B. percentage change in nominal GDP from one period to another.

C. absolute change in real GDP from one period to another.
D. percentage change in real GDP from one period to another.

23. The term economists use to describe a situation in which the economy’s overall price level is rising is:

A. economic growth

B. inflation
C. recession
D. business cycles

Use information from the Bureau of Economic Analysis (BEA) website, http://www.bea.gov/, answer question 24 and 25.

24. What is the real GDP growth rate in the 4th quarter of 2015 for the United States?

A. 1%
B. 2%
C. 3%

D. 4%

25. What is the value of real GDP in 1998 for the United States?

A. $11525.9 billion

B. $9089.2 billion

C. $11321.2 billion

D. $8889.7 billion

Q1. The total resource cost of goods and services produced by the U. S. economy is known as
a. real GDP
b. personal income
c. national wealth
d. national income

Q2. The difference between GDP and final sales equals
a. depreciation
b. exports
c. imports
d. net inventory change

Q3. Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income.
a. true
b. false

Q4. If a lawn service mows your grass, it is included in the GDP.
a. true
b. false

Q5. In national income accounting, grain fed to a hog at a commercial hog farm is considered a(n)
a. final good
b. intermediate good
c. consumer good
d. capital consumption allowance

Q6. Imports constitute a minus figure in national income accounting.
a. true
b. false

Q7. The total value added in the production of a final good
a. exceeds the price of the final good
b. equals the price of the final good
c. exceeds the total payments made to owners of productive resources used in the production
d. both (b) and (c)

Q8. The GDP is reported on a monthly basis by the Department of Commerce.
a. true
b. false

Q9. Transfer payments are added to NI in the process of determining personal income.
a. true
b. false

Q10. U.S. gross domestic product is converted to U.S. gross national product by
a. adding the value of output produced by U.S.-owned resources in foreign countries
b. subtracting the value of output produced by U.S.-owned resources in foreign countries
c. subtracting the value of output produced in the United States by foreign-owned resources
d. both (a) and (c)

Q11. Final sales are always larger than the GDP.
a. true
b. false

Q12. Because of the value of things produced inside households, (building your own desk, mowing your own lawn, etc.)
a. the GDP value is automatically adjusted upward to reflect this
b. the GDP value is automatically adjusted downward to reflect this
c. Official GDP is surely smaller than true total output
d. Official GDP is surely larger than true total output

Q13. A government surplus may trigger a decline in the money supply.
a. true
b. false

Q14. Real wages are determined by multiplying money wages by the CPI.
a. true
b. false

Q15. The more volatile the inflation rate, the weaker the money supply as a standard of deferred payment.
a. true
b. false

Q16. An increase in the money supply always causes an increase in the price level.
a. true
b. false

Q17. Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise?
a. 30 percent
b. 16.7 percent
c. 8.33 percent
d. 12 percent

Q18. In the past 10 years or so, average real wages of U.S. workers in nonagricultural industries have
a. increased about 40 percent
b. increased slightly
c. remained about the same
d. declined

Q19. If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of
a. $50,000
b. $500
c. $5,000
d. $4,500

Q20. The effect of a change in the money supply on economic activity may be offset by a change in velocity.
a. true
b. false

Q21. The current base period for the CPI is
a. 1967
b. 1977
c. 1982–1984
d. 1990

Q22. In the circular flow, an increase in the money supply tends to result when
a. planned I equals planned S
b. planned I is less than planned S
c. planned I is greater than planned S
d. there is a surplus government budget

Q23. COLA is a form of indexation.
a. true
b. false

Q24. The total checkable deposits a bank may have can be determined by dividing its reserves by the reserve requirement.
a. true
b. false

Q25. The Financial Services Modernization Act
a. reinforced the Glass Steagall Act
b. prevented mergers of banks
c. eliminated barriers between banks, brokerage houses, and insurance companies
d. eliminated all banking regulations

Q26. Each Federal Reserve Bank has its own board of directors.
a. true
b. false

Q27. The most frequently used tool of U.S. monetary policy is
a. the discount rate
b. the reserve requirement
c. open-market operations
d. moral suasion

Q28. When the Fed conducts open-market operations, it primarily uses
a. Treasury bills
b. long-term U.S. government bonds
c. bonds of publicly traded corporations
d. overnight loans of major banks

Q29. The Board of Governors of the Federal Reserve System has
a. 6 members
b. 7 members
c. 1 member from each Federal Reserve Bank
d. 20 members

Q30. If the Fed desires to increase checkable deposits, it may lower the reserve requirement.
a. true
b. false

Q31. The interest rate at which banks borrow excess reserves from each other is known as the
a. prime rate
b. federal funds rate
c. discount rate
d. T-bill rate

Q32. If member banks need to borrow reserves, they must do so through the discount window.
a. true
b. false

Q33. The Fed Chairman appears before Congress semi-annually to present the Monetary Policy Report.
a. true
b. false

Q34. In terms of the total number of payments, which of the following comprises the largest share?
a. cash
b. personal checks
c. debit cards
d. credit cards

Q35. By buying government securities, the Federal Open Market Committee adds to member banks' reserves.
a. true
b. false

Q36. More than 50 percent of commercial banks in the United States belong to the Federal Reserve System.
a. true
b. false

Q37. The Federal Reserve System is built around
a. 4 regional banks
b. 6 regional banks
c. 12 district banks
d. 1 bank with several branches

Q38. The time lags lead monetarists to contend that monetary policy is counterproductive.
a. true
b. false

Q39. The marginal propensity to consume is
a. the fraction of an increase in income that would be spent on consumer goods
b. the additional desire people have for consumer goods
c. the fraction of a person's total income normally spent for consumer goods
d. the change in consumption resulting from a $1 change in the price level

Q40. The consumption function shows
a. how fast the economy is consuming its capital
b. that the amount of national income determines the rate at which the economy consumes its resources
c. that households' incomes determine how much the households will spend for consumer goods
d. the rate at which people actually use up their consumer goods

Q41. In the simple Keynesian model, if output exceeds aggregate expenditures,
a. there will be no response from businesses
b. inventories will decrease and businesses will increase output
c. inventories will increase and businesses will increase output
d. inventories will increase and businesses will decrease output

Q42. If planned construction investment increases by $30 billion and the MPC is two-thirds, total output will increase by
a. $30 billion
b. $20 billion
c. $45 billion
d. $90 billion

Q43. "A given change in business investment will cause a larger change in equilibrium output." This statement describes an important Keynesian concept called the
a. multiplier effect
b. marginal propensity to consume
c. marginal propensity to invest
d. consumption function

Q44. In the multiplier formula, 1/MPS equals the multiplier.
a. true
b. false

Q45. The classical economists held that chronic unemployment was likely.
a. true
b. false

Q46. As income increases, the absolute level of planned consumption will increase.
a. true
b. false

Q47. The new classical school contends that government fiscal policy is better than monetary policy in controlling inflation.
a. true
b. false

Q48. Higher price levels are associated with lower aggregate expenditure at every level of income.
a. true
b. false

Q49. Any time that planned leakages exceed planned injections, the economy will expand.
a. true
b. false

Q50. According to the Keynesian model, increased foreign spending for U.S. goods is likely to
a. reduce total employment in the United States
b. increase total employment in the foreign country
c. reduce total output in the United States
d. increase total output in the United States