CAS EC 102 Final: Econ 102 Study Guide

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17 May 2018

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Lecture 1:

●Gross domestic product (GDP):

The market value of all final goods and services produced within a country in a year

- The last time the good is sold: final

Ex: the GDP = 2.50

Ex: Neptune oyster buys $100 worth of lobster from a fisherman: not GDP because the lobster

would be sold to the customers. That’s price would be the GDP

Ex: I buy $150 worth of broiled lobster at NO: the GDP, final sale

Ex: Delta buys a new jet from boeing: the GDP

●Measuring GDP

○ Process called: “National Income Accounting”

○Calculated by the Bureau of Economic Analysis: a division of the Dept. of

Commerce

○The expenditure Method:

- Calculates GDP by adding up the value of expenditure on all final

goods and services in the economy

●An important identity:

○Y = C + I + G + NX

■ Y= GDP - total value output

■ C= Consumption

■ I= Investment

■G= Government purchases

■NX= Net export (Export-Import)

●Aggregate expenditure (tổng chi tiêu): C, I, G

Ex: I buy $150 worth of broiled lobster at NO. Consumption increases utility

Ex: Delta buys a new jet from boeing: Investment, create another service

Ex: Air France buys a new jet from boeing: Net export, from another country

Lecture 2:

●Per capita GDP

○Per capita GDP =

●Potential GDP:

○It’s just a guess/estimate of what a GDP would be if all factors of production (e.g.

labor and capital) had been used at their “normal” rates

○It is a measure of the economy’s capacity to produce, not its actual production

○Actual vs Potential GDP

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●Real vs nominal GDP(không thực)

○Nominal GDP is the value of all goods and services measured at current prices.

■Assume there are N goods produced in the economy

●2016 Nominal GDP = P^1Q^1+...+P^NQ^N of 2016

○Real GDP is the value of all goods and services measured at a constant price

level

■Say we use year 2005 as a base

●2016 Real GDP = P^1 of 2005 * Q^1 of 2016 = $16.77 T

● Notation for the Rest of the course:

○Y = Real GDP

○P = Price Level

○P*Y = Nominal GDP

●Measure of the Price Level (P) / The GDP Deflator:

○The GDP Deflator

■Ratio of nominal GDP to real GDP, time 100

■GDP Deflator = (Nominal GDP / real GDP) * 100

Ex: GDP deflator for 2016 = (2016 nominal GDP/ 2016 real GDP) *100

= ($18.6T / 16.7T) * 100

= 111

●Price Level vs. Inflation

○P stands for the price level (measured by CPI or GDP Deflator)

○Inflation = percentage change in P

 = %ΔP

●GDP deflator between two years:

○

●The GDP Deflator

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○Ratio of nominal GDP to real GDP, time 100

●The consumer Price Index (CPI)

○Measures change in the prices of things that an average consumer buys

○The most closely watched indicator of what is happening to prices

○Release of a new CPI number can have a big impact on financial markets

○Calculated and published by the Bureau of Labor Statistics (BLS)

○CPI number is released monthly

○Released in the middle of the month

○Uses:

■Tracks changes in the typical household cost of living

■Adjusts many contacts of inflation (“COLAs”)

■Allows comparisons of dollar amount over time

●How the BLS constructs the CPI:

1. Survey consumers to determine composition of the typical consumer’s “basket” of

goods

2. Every month, collect data on prices of all items in the basket; compute cost of

basket

3. Choose a base year (currently an average of price of 1982 - 1984)

4. Calculate the CPI in a given month as follows:

●Disinflation vs. Deflation:

○Disinflation: is when inflation is going down so prices are still increasing, but not

so fast (vẫn trên vạch 0)

○Deflation is when prices are going down (ở dưới vách 0)

=> easier to pay debt

Lecture 3:

●CPI vs. GDP Deflator - two measures of inflation in the U.S

CPI

GDP Deflator

Includes only goods typically bought by

consumers

Includes all goods

Includes imported goods

Include only domestic goods

Uses a fixed basket of goods (take a

basket and price it, use the survey of what

consumers buy)

Used a changing basket of goods

●Real vs. Nominal Interest Rates:

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CAS EC 102 Full Course Notes

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Document Summary

The market value of all final goods and services produced within a country in a year. The last time the good is sold: final. Ex: neptune oyster buys worth of lobster from a fisherman: not gdp because the lobster would be sold to the customers. Ex: i buy worth of broiled lobster at no: the gdp, final sale. Ex: delta buys a new jet from boeing: the gdp. Calculated by the bureau of economic analysis: a division of the dept. of. Calculates gdp by adding up the value of expenditure on all final goods and services in the economy. Y = c + i + g + nx. Aggregate expenditure (t ng chi ti u): c, i, g. Ex: i buy worth of broiled lobster at no. Ex: delta buys a new jet from boeing: investment, create another service. Ex: air france buys a new jet from boeing: net export, from another country.

Related Questions

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.

periwinkletoad580

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 economyâs 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

goldgnu271

Urgent! I need help with these questions, please.

1- The GDP of Mexico in current US dollars according to the World Bank was the US $0.683 Trillion in 2000 and had grown to the US $1.151 Trillion in 2015. Calculate the GDP percentage change from 2000 to 2015. Show your work.

2- In the expenditure approach to GDP, government purchases include all spending on goods, services, and transfer payments by government agencies.

A- True
B- False

3- The economy is considered at full employment when:
A. the unemployment rate is zero.
B. structural unemployment is zero.
C. cyclical unemployment is zero.
D. frictional unemployment is zero.

4- Which of the following would be considered 'private investment' in GDP?
A. A computer printer purchased by a law firm
B. A computer printer purchased by a student
C. A computer printer purchased by the St. Louis police department
D. All of these

5- Goods that are not sold during the year are included as part of that year's investment in calculating GDP.
A-True
B- False

6- When the nominal GDP has increased in the United States, we know that:

A- the U.S. price level has increased
B- the U.S. price level has decreased.
C- U.S. output of goods and services has increased.
D- Either U.S. output of goods and services or the price level has increased.
E- Both U.S. output of goods and services and the price level have increased.

7- Fill in the blank: GDP is the total value of ________ produced for the marketplace during a given year, within the nation's borders

A- all goods
B- all goods and services
C- all final goods
D- all final goods and services
E- all final and intermediate goods and services

8- Structural unemployment is considered a microeconomic problem.

A- True
B- False

9- The unemployment rate in the United States is defined as the number of unemployed divided by _____.
A- the U.S. population
B- the number of employed plus the number of unemployed
C- the U.S. population over the age of 16
D- the number of employed
E- the number of employed minus the number of unemployed

10- If Americans buy $500 billion worth of foreign goods and services, and foreigners buy $200 billion worth of American goods and services, then net exports for the United States are equal to _____.
A. $100 billion
B. $200 billion
C. -$300 billion
D. $500 billion
E. $700 billion

11- Discouraged workers are people who used to work, but no longer want a job.

A- True
B- False

12- In the expenditure approach, GDP is equal to _____.

A. C + I + G + exports - imports

B. C + I + G

C. C + I + G + exports

D. C + I + G + imports

E. C + I + G + exports + imports

13- U.S. GDP measures the production of goods and services by Americans, regardless of which country they reside in when they produce those goods and services.

A- True
B- False

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CAS EC 102 Final: Econ 102 Study Guide

CAS EC 102 Full Course Notes

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