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ECON 1000 Study Guide - Classical Dichotomy, Money Multiplier, Loanable Funds

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grayshark165
11 Jul 2014
School
Carleton University
Department
Economics
Course
ECON 1000
Professor
All

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Document Summary

Microeconomics:the study of how individual households and firms make decisions, interact with one another in markets. Macroeconomics:the study of the economy as a whole. Gdp: the market value of all final goods & services produced within a countryin a given period of time. Consumption (c): s total spending by households on goods & services. Investment (i): is total spending on goods that will be used in the future to produce more goods. Nominal gdp values output valued at current prices. Real gdp values output valued at constant prices of a base year. The gdp deflator: is a measure of the overall level of prices. The inflation rate is the percentage change in the price level from the previous period. The consumer price index (cpi) is a measure of the overall cost of the goods and services bought by a typical consumer. A dollar amount is for inflation if it is automatically corrected for inflation by law o.

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Related Questions

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.

Year Price of hamburgers Price of hot dogs
2009 $5 $3
2010 5.50 3.30
2011 5.61 3.63

Refer to Table 24-7. Between 2009 and 2011, the cost of living increased by

A. 17 percent.
B. 14 percent.
C. 19 percent.
D. 6 percent.

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

A. the CPI is calculated more often than the GDP deflator is.
B. the CPI is easier to measure.
C. the GDP deflator cannot be used to gauge inflation.
D. the CPI better reflects the goods and services bought by consumers.

A COLA automatically raises the wage when:

A. the consumer price index increases.
B. the producer price index increases.
C. taxes increase.
D. GDP increases.

There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of the measures to use depends in many cases on the specific question in which you are interested. For each of the following situations, state whether the CPI or GDP deflator is a more appropriate measure to use and explain why the statistic is preferred.

a.You are interested in looking at the impact of higher prices of imported oil in the overall cost of living.

b.The government is interested in whether increases in defense spending are affecting the price level.

c.An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.