I am going to die bc of this class
In the economy of wrexington in 2008, nominal GDP was 18 billion and the GDP deflator was 120. What was wrexingtons real GDP in 2008
$15 billion,
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which sells for $250. Taken together, these two transactions contribute
$250 to GDP
A basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004 , the basket's cost was $52; and in 2006, the basket's cost was $54.60. the Value of the CPI in 2004 was
104.0, 52/50= 104.0
An increase in spending which shifts the expenditure schedule upward will change equilibrium GDP by
An amount greater than the change in spending because since price is changing due to the increase in spending m
Changes in nominal GDP reflect, Nominal GDP ( the final value of goods and services with the current price at the time , **includes inflation and deflation**)
Both changes in prices and changes in the amounts being produced
saving is a leakage in a sense that
Consumers spend less than their total income
A consumption function would shift downward if
DI (disposable income: Amount of money an individual has after taxes) falls
The typical result of an adverse supply shock( a sudden event that makes a decrease in the supply for whichever good or service ex: tornado destroying a farm) is
Falling output accompanied by accelerating inflation
One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake a bread that is sold for $3.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?
GDP increases by $5.00 because The price of the $1.00 flour to the bakery and grocery store is already included in the prices that the flour is being resold at. $2.00+$3.00= $5.00
When AD (Aggregate demand) decreases rapidly, the economy is likely to experience
Inflation , because producers want more demand in their product so they lower their prices to get a higher demand
Because business firms must finance most investment expenditures, a key determinant of investment is
Interest rates
inventory reductions are a signal indicating that
Manufacturers need to increase production because the quality of the good will be significantly better and can raise it to a higher price
in 2006, 50 units of cranbreries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. in 2005, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit, for 2006....
Nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90 ......
If total spending is greater than total output
Price levels will rise and output will increase
An inflationary gap will occur when
Real GDP exceeds potential GDP
If nominal GDP doubles and the GDP deflator doubles, then real GDP
Remains constant , 200/100(100),400/100(100), Nominal GDP/Real GDP(100)= GDP deflator
One of the main conclusions of keynes in the general theory is that ( READ THIS)
The economy will not automatically gravitate to full employment
GDP is defined as
The market value of all final goods and services produced within a country in a given period of time
The term inflation is used to describe a situation in which
The overall level of prices in the economy is increasing
Because in the long run wages and prices adjust, the long run AS curve is
Vertical and is the same as potential GDP
When the expenditure schedule is to high, the result is
an inflationary gap, because the demand for goods and services are much higher than what the production is making , ex: higher employment rate and increased trade activities
Recessionary gaps( when the GDP is lower than the actual potential of the GDP) usually lead to
cyclical unemployment (when companies don't need as many employees to work since less people want the product they are selling)
If money wages increase, the most likely result is a(n)
decrease in aggregate supply (AS)because they are giving more money to employees than to purchasing resources for production
Taxes reduce total spending
indirectly by reducing disposable incomes
Changes in real GDP reflect
only changes in amounts being produced
A decrease in the price if resources will cause the AS curve to
shift inward
Increases in the availability of natural resources will affect the AS curve such that it
shifts outward
An increase in one of the components of expenditures will typically shift the expenditure schedule
upward by an amount greater than the change in expenditures because they are spending over the amount of the set price.