ECON Final SG
Popular in Introductory Macroeconomic Analysis and Policy, Goffe
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This 4 page Study Guide was uploaded by Evangelos Katradis on Monday May 2, 2016. The Study Guide belongs to ECON 104 at Pennsylvania State University taught by Goffe in Spring2015. Since its upload, it has received 45 views.
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Date Created: 05/02/16
ECON FINAL STUDY GUIDE Real GDP= base yr price X quantity Nominal GDP= price X quantity 16.4 tril real GDP 18.0 tril nominal GDP GDP measures all of production, spending, or income in all economy. (K) capita manufactured goods owned by firms to produce other goods and services. ex. hammer intermediate goods used up/transformed in the production process ex. flourbread, woodhouse (I) investmentthe purchase of capital goods the addition of inventories (goods to be used or sold later) the purchase of a new house or apt Monetary vs. Fiscal Policy M: Conducted by U.S. Federal Reserve established by Congress “promote effectively the goals of max employment, stable prices and moderate long term interest rates” ***max employment, stable prices*** Fed Chair: Janet Yellin FOMC F: changes in federal expenditures and taxes (changed independently) controlled by President and Congress Money: asset that does: 1. medium of exchange 2. a store of value 3. a unit of account 4. standard of differed payment M1~ cash + checkable deposits M2~ M1 + savings accounts GDP Deflator= (nominal GDP/real GDP)X 100 CPI= current item price X base yr price X (current CPI/base yr CPI) GDP Deflator measures the “price level” CPI is an estimate of the change in prices of good and services, bought for consumption CPI limitations application / measurement ex. not applicable to all pop. groups / not designed to measure inflation inflation = % change in price index GDP deflator: 110 (2015 III) CPI: 237.8 (12/2015) • Rule of 70= 70/(growth rate) • Role of Capital & Technology in Growth key terms: Y= real GDP (real production or income) L= # of workers in country’s economy Y/L= labor productivity how much the average worker produces in a year pop= pop of a country Y/pop= GDP per person (Y/L)= (L/pop) X (Y/L) • Per worker production function: Y/L= y axis K/L= x axis Y/L= A(K/L)^(.3) A= TFP “total factor productivity • TFP measures technology: human capital, better capital & better organized firms Q: In this shop, as capital (panini machines) increases, ceteris paribus, it is most accurate to say that output (panini sandwiches)................................................c a) increases at an increasing rate b) increases at a constant rate c) increases at a decreasing rate • unemployment rate = [(unemployed + marginal attached + part time want full) / (labor force + marginal attached)] • Terms: • unemployed not working but actively searching • labor force employed + unemployed (or working & searching for a job) • unemployment rate labor force/ unemployed • labor force participation rate labor force/population aged 16+ • Frictional unemployment time period between jobs when a worker is searching for, or transitioning from one job to another. • Cyclical unemployment unemployment that results when the overall demand for goods and services in an economy cannot support full employment. • Structural unemployment a form of unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers. • Okun's law the relationship between an economy's unemployment rate and its gross national product (GNP) • real interest rate= nominal interest rate inflation rate • money 1) medium of exchange 2) a store of value 3) a unit of command 4) standard of deferred payment Short run Aggregate Supply (SRAS): Shifts Types of costs to businesses costs in general (like wages & capital) energy prices (sudden change: shock) expected increases in costs due to predicted inflation (P increases) Question: Say K or L increases or a technology change happened. SRAS ___ and we ____ keep P constant to understand the shift. a. shifts right, do not b. shifts right, do c. shifts left, do not d. shifts left, do Question: If costs to businesses increases, for the same P they would __ production. Or, for the same production (Y) they would __ prices. a. raise, raise b. cut, raise c. raise, cut d. cut, cut Shift Summary: • increase K, L, or technological change> SRAS right • increase in costs to business (wages, capital, energy)> SRAS left • expected inflation> SRAS left Statistic Equilibrium: Question: Draw a graph for each of the following events. Show ONLY the curve that would be shifted by the event. Be sure to label all curves and axes and to identify all shifts. a. G increases b. interest rates rise c. oil prices fall d. T increases Question: In these 4 events, AD shifts right ___ time(s) and SRAS shifts right ___ time(s). a. 1,0 b. 0,1 c. 2,0 d. 0,2 e. 1,1 (AD) Aggregate Demand total demand for final goods & services in the economy (AS) Aggregate Supply total supply of goods & services produced in the economy (SRAS) Short run aggregate supply curve relation between real production and the price level Causes of AD shift: • consumption • investment • government spending • net exports Causes of AS shift: • capital • technology • # of workers
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