econ 1202 quiz study guide

nominal GDP formula

the average price of goods MULTIPLIED BY the number of goods produced

real GDP equation

nominal GDP / deflator x 100

Interpret:

Deflator in 2018: 114

Prices rose 14% from the base year through 2018

Interpret:

Deflator in 2019: 100

Prices did not change from the base year through 2019

Interpret:

Deflator in 2022 = 95

Prices FELL by 5% from 2012 through 2022

Define nominal GDP

current value of newly produced final goods and services

Assume Deflator in 2020 = 110. Give economic meaning to this value

Prices rose 10% from the base year through 2020

Assume Nominal GDP in 2020 = $4,000. The deflator is 110.

Calculate the value of real GDP in 2020 and give economic meaning to this value.

Real GDP = 4000 / 110 × 100 = $3636.36

$3636 tells us the value of 2020 output measured with base year prices

Explain what it means if inflation in 2018 = 7%

Prices of goods rose 7% from Jan 1 2018 to Dec 31 2018

Identify and explain the three types of unemployment.

Frictional unemployment, Structural unemployment, Cyclical Unemployment

Assume:

• Nominal GDP in 2018 = $5000

• Deflator in 2018 = 120

• Nominal GDP in 2018 = $9000

• Deflator in 2019 = 135

Interpret the deflator in 2018 and 2019 and find real GDP in 2018 and 2019

• prices rose 20% from the base year through 2018 (120-100)

• prices rose 35% from the base year through 2019 (135-100)

• Real GDP in 2018 = 5000/120 × 100 = $4167

• Real GDP in 2019 = 9000/135 × 100 = $6667

Interpret:

CPI in 2017 = 111

the average price of consumer goods rose 11% from the base year through 2017

Interpret:

PPI in 2021 = 118

The average price of producer goods rose 18% from the base year through 2021

Define inflation

measures the average price of consumer goods

unemployment rate formula

unemployed / labor force x 100

labor force participation rate (formula)

Labor force / working age population x 100

Find the unemployment rate and labor force participation rate given..

• employed = 80

• unemployed = 10

• working age population = 150

unemployment rate = 10 / 80 + 10 × 100 = 11.1%

labor force participation rate = 90 / 150 × 100 = 60%

Explain frictional unemployment

There’s jobs available for people with “A” skills, and there are unemployed people with those same “A” skills

Explain Structural unemployment

There’s jobs available for people with “B” skills and they’re unemployed people with “A” skills

Explain cyclical unemployment

an economic downturn creates unemployment throughout the economy

consumption function

c = a + b * Yd

identify the C variable to the consumption function

C = total dollar amount of household consumption spending

Identify the A variable to the consumption function

autonomous consumption spending. money spent that is not derived from current earned income. money that is spent on gifts, savings, borowing

Identify b in the consumption function

MPC, how much we spend of each additional dollar of Yd

If the value of “b” changes, the consumption function gets…

steeper or flatter. C moves UP or DOWN

If the value of '“a” changes, it is due to changes in…

household wealth, ease + cheapness of borrowing, income expectations, we spend more or less out of savings, borrowing, wealth