Economics Unit 4 CH 13
When analyzing a CPI or a PPI, what is the base year? always!
100
How do you calculate GDP?
All final goods and services produced inside a country over 12 months multiplied by their prices added together give us our total value of production.
Define GDP Deflator
An index of the average level of prices for all goods and services in the economy.
Why do most economists agree that Real GDP per capita is the most important measure of long term growth?
Because it adjusts for changes in both inflation and population.
What are the basic sectors of the U.S economy?
Conusmer sector, Investment sector, government sector, and foreign sector.
What are the three most important factors affecting population growth?
Fertility Rate, Life expectancy, and Net Immigration.
How does economic growth benefit a country?
It raises the standard of living, eases the burden of government, helps solve domestic problems, increases the tax base, & boosts foreign trade.
Name the four factors that influence economic growth.
Land, Labor, Capital and Entrepreneurs.
The Output-Expenditure Model
Macroeconomic model used to show aggregate demand by the consumer, investment, government, and foreign sectors.
What are secondhand sales?
Products that have already been counted in the GDP.
Define Standard of Living
Quality of life based on the possession of necessities and luxuries that make life easier.
What is the most useful measure of standard of living?
REAL GDP per capita
How do you convert GDP to GDP in real dollars?
Real GDP = GDP in current dollars (nominal) divided by GDP price deflator X 100
Can GDP continue to rise even if there are no changes in the quantity of goods and services produced?
Yes, because of inflation
Price Index
a statistical series that can be used to measure changes in prices over time.
What is the largest sector of the macro-economy?
consumer
What is Real GDP per capita?
dollar amount of real GDP on a per person basis
Consumer Price Index
is 90,000 items from 364 categories taken from 85 geographical regions around the country
What does the standard of living mean?
means the quality of life based on the possession of necessities and luxuries that make life easier.
What is an example of a non-market transaction?
mowing your own lawn, painting your own house, homemakers (homeowner doing these jobs on their own)
What are intermediate products?
products used to make other products that are already counted in GDP so they are not counted twice
Macroeconomics
The part of economic theory dealing with the economy as a whole and decision making by large units such as governments and unions.
GDP Price Deflator
Implicit GDP Price Deflator is an index of average level of prices for all goods and services in the economy (Compiled quarterly)
What products not included in the GDP?
Intermediate Products Secondhand Sales Non-market transactions Illegal Activities
Why is the foreign sector sometimes written as X-M?
It means exports minus imports.
Fill in the blank for the output expenhditure model- GDP= C + ___ + ___ + (___ - ___)
GDP= C + I + G + (X-M)
Producer Price Index
Measures price changes paid by domestic producers for their inputs. It is based on 100,000 commodities and uses 1982 as the base year. It is broken down into subcategories like farm products, fuels, chemicals, rubber, processed foods, etc.
Once you remove inflation- what does GDP become?
Once the distortions have been removed it is called real GDP or GDP in constant dollars.
Gross Domestic Product
the dollar amount of all final goods and services produced within a country over the course of one year
Inflation
the rise in the general price level of goods and services.