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econ final notes.docx

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ECON 1000
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CHAPTER 5 Measuring a Nations incomeGDP the market value of all final goodsservices produced within a country in a given period of timeYCIGNXWhereC ConsumptionI Investment G Government Purchases NX Net Exports Nominal GDP values output valued at current prices It is not corrected for inflationReal GDP values output valued at constant prices of a base year Real GDP is corrected for inflationGDP deflator The GDP deflator is a measure of the overall level of pricesGDP deflator100 x nominal GDPreal GDPCHAPTER 6 Measuring the Cost of LivingConsumer price index CPI is a measure of the overall cost of the goods and services bought by a typical consumerHow to calculate CPIStep1 Determine the basketStep 2 Find the pricesStep 3 Compute the baskets costStep 4 Choose a base year and determine the IndexCPI100 x cost of basket in current yearcost of basket in base yearInflation rateCPI this yearCPI last yearCPI last year x 100Real Interest Ratenominal interest rateinflation rateCHAPTER 7 Production and Growthproductivity the average quantity of gs produced per unit of labour input YLrefers to the amount of goods and services that a worker can produce from each hour of workFactors of production The inputs used to produce goods and servicesPhysical capital per worker The stock of equipment and structures used to produce gs KLHuman capital per worker the knowledge and skills workers acquire through education training and experience HLNatural resources per worker the inputs into production that nature provides eg land mineral deposits NLTechnological knowledge per worker societys understanding of the best ways to produce gs AThe production function YLA F 1 KL HL NLCHAPTER 8 Saving Investment and the Financial SystemFinancial markets institutions through which savers can directly provide funds to borrowersA bond is a certificate of indebtedness that specifies obligations of the borrower to the holder of the bondCredit Risk The probability that the borrower will fail to pay some of the interest or principalStock represents a claim to partial ownership in a firm and is therefore a claim to the profits that the firm makesFinancial intermediaries institutions through which savers can indirectly provide funds to borrowersie banks
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