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Econ 50C1

by: Amanda Lee

Econ 50C1 Econ150C1

Marketplace > Economcs > Econ150C1 > Econ 50C1
Amanda Lee
GPA 3.929
An Economic Perspective
Charity-Joy Archiado

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About this Document

Unit 3 notes. Taken from 11/4/14-11/13/14. Last unit before final exam.
An Economic Perspective
Charity-Joy Archiado
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This 5 page Bundle was uploaded by Amanda Lee on Tuesday January 27, 2015. The Bundle belongs to Econ150C1 at a university taught by Charity-Joy Archiado in Fall. Since its upload, it has received 336 views.

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Date Created: 01/27/15
114 What do you personally spend your money on 1 Food 2 Clothes 3 Makeuphair products Why use GDP 1 Estimate living standards across time and nations 2 Measure longrun economic growth 3 Determine whether an economy is experiencing a shortrun expansion or recession Gross Domestic Product The value of all nal goods and services produced in a country during a speci c period of time includes only nal goods and current production lntermediate vs Final goods 0 Intermediate goods that rms repackage or bundle with other goods to be sold at a later stage 0 Final goods sold to nal users 0 Services make up about 70 of GDP in US Current Production GDP doesn t recount a good that was produced last year Resoldused goods 0 Stocks and bonds Measure GDP using expenditures CIGNX C consumption nal purchase of goods and services by households l investment purchases by businesses that add to their inventories 0 Private spending on tools factories and equipment used to produce future output 0 New house purchases 0 Investment is NOT investing in stocks and bonds G Government purchases Government employee salaries Government buildings and equipment produces Public works projects national defense schools post of ces Does NOT count transfer payments such as welfare or social secur y o NX net exports Exports minus imports o NX is a small fraction of GDP 0 A trade de cit isn t necessarily bad More imports means more goods and services for people in this country Probems with GDP Nonmarket goods 0 Underground economy unreported income or goods Externalities 0 Leisure time 0 Quality of goods purchased OOOO 116 International trade allows specialization and can trade for more than you can produce on your own 1 Growth in international trade a Total world exports are onefourth the size of world GDP 2 Comparative advantage The ability to produce a good or service at a lower opportunity cost than others allows specialization 3 Tariffs and quotas a Tariff tax on imported goods i Higher revenue for domestic producers ii Lower revenue for foreign producers iii Higher prices for consumers iv Tax revenue for government b Deadweight loss consumers lose more than producers gain c Import quotas limits on the quantity of goods that can be imported i Higher revenue for domestic producers ii Higher revenue for foreign producers iii Higher prices for consumers iv No tax revenue for government d Arguments for trade barriers i National security ii Infant industry iii Retaliation Economies of scale lower production costs as a result of largescale production Factories equipment assembly lines 0 Bulk purchases 0 Distribution network 0 Volume marketing ncreased competition Decreases costs Increases quality 0 More options for consumers 1113 Personal Finance Lasting effect people often fail to accurately predict the economic bene ts of experiential purchases compared with material ones according to one study Present biased living in the present and not weighing the consequences of the future Types of planning 0 Asset acquisition 0 Liability amp Insurance 0 Savings amp Investment 0 Employee bene t 0 Tax planning 0 Retirement amp Estate Steps to Financial Planning De ne nancial goals Develop nancial plan to achieve goals Implement budgets to monitor and control progress toward goals Use nancial statements to evaluate results and take corrective action if necessary 5 Rede ne goals and revise plans Goals Speci c Measurable Achievable Realistic Timely Short term goals 12 months nish freshman year with at least 30 lease or buy a used car lntermediate 26 years summer internship juniorsenior year graduate UA 3 years Long term 6 years buy a house start a family Financial Statements 0 Balance sheet your net worth assets liabilities Income and expense statement cash ow over a speci c period of time 0 Budget short term nancial planning report Wealth total value of all items owned by an individual 0 Financial assets held for future returns Tangible asses held for present consumption or future returns 0 Fair market value what you can reasonably expect to sell asset for on the market Endowment effect once an object is in your possession you think it is worth more than before it was your property ncome cash in amp expense cash out statement 0 Food 0 Housing 0 Apparel and Services 0 Transportation 0 Healthcare 0 Entertainment 0 Cash contributions 0 Personal insurance and pensions Other Personal monthly expense estimates gtUUl 39 0 Rent 867 0 Food 400 0 Transportation 35 0 Apparel and services 100 0 Entertainment 20 ncome determinants Location 0 Age Marital status 0 Education 0 Career Do you have a de cit Shift expenses 0 Use savings or borrowing o Liquidate investments 0 Cut low priority expenses 0 Increase income Common budgeting mistakes 0 Failing to plan for inevitable No emergency fund covers expenses for 36 months 0 Living above your means Time value of money 0 Present value what your money is worth now 0 Future value what the money you have now will be worth in the future 0 Discount a future sum of money to nd the PV 0 Compound a present sum of money to nd the FV 0 PV FV1iN o FV PV1iN o N number of periods 0 l rate of interest decimal Cash Management 0 Cash 0 Checking Savings money market 0 Certi cate of deposit 0 US Treasury bill US savings bond EE Which type of savings will you choose 0 Liquidity Risk preference 0 Length of time 0 Current and anticipated interest rates Simple interest paid only on the initial amount Compound interest paid on the initial amount AND the interest earned in each prior period Nomina interest rate the stated interest rate APR Annual Percentage Rate Effective interest rate the annual interest rate that is actually earned APY Annual Percentage Yield Interest earned during the yearamount of money invested The effective rate is larger when interest is compounded more frequently


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