Important Concepts from tests 1, 2, and 3
Real value=
(index current year/ index base year)*nominal value (like income)
GDP deflator=
(Nominal GDP Divided by Real GDP) x 100
How to calculate CPI when taking inflation into account:
((Cost of current year divided by Cost of base year)x100) -100
CPI=
(Cost in current year/ cost in base year)*100
Which of the following would NOT lead to higher prices?
An increase in the supply of food (see supply and demand curve)
The natural Rate of unemployment does NOT include:
Cyclical Unemployment (changes due to change in business cycle)
The GDP deflator is an index that includes prices of all of the following except:
IMPORTS
Which component of GDP includes inventory changes?
Investment
Law of Supply states that as:
prices rise, the the quantity supplied rises
In the US, our principle measure of inflation is:
The consumer Price index
What would be the effect on the equilibrium price and equilibrium quantity of new housing if mortgage interest rates rise and the costs of building a house rise simultaneously?
The equilibrium price cannot be predicted, but the equilibrium quantity will fall.
In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect:
Unknown change in the equilibrium price, but a decrease in the equilibrium quantity of cable television
Which factor would NOT change the demand for sea kayak tours?
a decrease in the price of a sea kayak tour (because a change in price slides the graph and non-price factors shift it)
The main role of a market is to:
allocate resources
According to the circular flow model, the value of the household sector and the value of the business sector will:
always be equal
Labor force=
employed+unemployed
If the Surgeon General announced that wearing baseball caps will eliminate dandruff, then, ceteris paribus, the:
equilibrium price of baseball caps would increase.
Two approaches used by the government in estimating GDP are:
expenditure and income
Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n):
increase in the equilibrium price of pizza.
GDPI=
investment in structures, equipment, software, and net inventory
The natural rate of employment:
is the rate at which the actual inflation rate is equal to people's inflationary expectations
Smallest part of US GDP is
net exports
If the price of Kayaks rise, then the:
quantity supplied of kayaks increase
The production possibilities model holds what constant?
resources and technology
What is the value of total production and inventory investment?
the difference in inventory from the beginning of the year to end of year + the production/ ammount sold
Producer surplus is:
the gap between the supply curve and the market price
Theory of comparative advantage says
we should export goods that can be produced than they could in another country