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