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.