econ quest

What is counted in GDP?

All final goods and services produced within a country's borders in a given time period are counted in GDP.

What is not counted in GDP? Why not?

Intermediate goods, used goods, and financial transactions are not counted in GDP because they do not reflect current production or consumption.

What is the formula for GDP?

GDP can be calculated using the formula: GDP = C + Ig + G + Xn, where C is consumption, Ig is gross private domestic investment, G is government spending, and Xn is net exports.

What is the difference between a nominal number and a real number?

Nominal numbers are not adjusted for inflation, while real numbers are adjusted to reflect the true value over time, accounting for changes in price levels.

What causes a shift in Aggregate Demand?

Shifts in Aggregate Demand can be caused by changes in C (consumption), Ig (investment), G (government spending), and Xn (net exports). For example, an increase in consumer confidence can raise consumption (C), while a decrease in foreign demand can lower net exports (Xn).

What is the impact on price level, output, and unemployment of a shift in AD?

An increase in Aggregate Demand typically leads to higher price levels, increased output, and lower unemployment, while a decrease in AD can result in lower price levels, decreased output, and higher unemployment.

What causes a shift in Aggregate Supply?

Factors such as changes in production costs, supply chain disruptions, and new regulations can cause a shift in Aggregate Supply.

What is the impact on price level, output, and unemployment of a shift in AS?

A rightward shift in Aggregate Supply usually lowers price levels and increases output, which can decrease unemployment, while a leftward shift might lead to higher price levels and decreased output, increasing unemployment.

What do different economic measures tell us about the state of the economy?

Economic measures such as GDP, unemployment rates, and inflation rates provide insights about economic health, growth potential, and stability.

Who are the winners and losers of unanticipated inflation? Why?

Winners of unanticipated inflation typically include borrowers who pay back loans with less valuable money, while losers are lenders and those on fixed incomes who face reduced purchasing power.

Compare and contrast the ideals of classical vs Keynesian economics.

Classical economics emphasizes free markets and self-regulating behavior, while Keynesian economics focuses on government intervention to manage demand and address unemployment.

How can fiscal policy be used to manage the economy?

Fiscal policy can be used by adjusting government spending and taxation to influence overall economic activity, aiming to stabilize the economy during fluctuations