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Marcoeconomics Exam 1 Study Guide

by: Katherine Rizzieri

Marcoeconomics Exam 1 Study Guide ECON 202

Marketplace > Towson University > Economics > ECON 202 > Marcoeconomics Exam 1 Study Guide
Katherine Rizzieri

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GDP, Nominal GDP, CPI, Real GDP, Deflator, Inflation, Graphs, etc...
Macroeconomic Principles
Seth Gitter
Study Guide
Macro, Econ
50 ?




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This 5 page Study Guide was uploaded by Katherine Rizzieri on Monday September 26, 2016. The Study Guide belongs to ECON 202 at Towson University taught by Seth Gitter in Fall 2016. Since its upload, it has received 43 views. For similar materials see Macroeconomic Principles in Economics at Towson University.


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Date Created: 09/26/16
Exam 1 Study Guide Useful Equations: GDP = consumption + investment + government spending + exports – imports Nominal GDP = price x quantity + price x quantity … Real GDP = price x production + price x production … (uses only years price controls for prices) Prices = [(nominal GDP)/(Real GDP)] x 100 Deflator = (Nominal GDP/Real GDP) x 100 % Change = [new-old]/old GDP per capita = [GDP/# of people] Savings = GDP – consumption – government spending The Rule of 72: How long it takes the economy to double in size = 72/growth rate Ex,, 72/8 = 9 years to double in size GDP per capita growth = GDP growth – population Ex,, 4% - 1% = 3%  72/3 = 24 years CPI Formula: CPI x [(Cost in a Year X)/(Cost in Base Year)] x 100 New Amount of $ = [(Newer CPI)/(Older CPI)] x Older amount of money Definitions: 1. Scarcity—there is a limit to how much you can consume 2. Opportunity Cost—where the opportunity cost is what you give up to get something 3. Micro Econ—Choices are made by firms and people 4. Macro Econ—Focuses on the economy as a whole based on those choices 5. Hypothesis—belief about how the world works that is testable 6. Model—set of assumptions about real world aspects to make hypotheses; all models are wrong, but some are useful because you can’t control everything 7. Positive Statement—fact 8. Normative Statement—belief about what should happen 9. Production Possibilities Frontier (PPF) points; inside line = inefficient, on line = efficient, outside of line = infeasible 10. Comparative Advantage—whoever has the lower opportunity cost 11. Absolute Advantage—who does more per day for each good 12. GDP—value of all final goods & services sold in a country (no exports/imports) in a given period of time a. the value—based on price & not what people think b. final—only count goods & services that are not reused to make other things; don’t double \ count, exclude material & labor costs c. sold—something has to be sold to be part of a GDP d. country—in a country means whatever country it is produced in 13. Nominal GDP—prices change each year, not controlling prices, add value using prices from each year 14. Real GDP—use only years price. Controls for prices, use 1 year (base year), measures production & see if prices should change 15. Inflation—prices are going up 16. Deflator—measures the level of price changes over time so that current prices can be accurately compared to historical prices; includes all the goods that are produced; puts more emphasis on goods that are larger percentage of GDP in terms of value - does not work well if prices go up & people stop buying as much, it might not reflect true Inflation - only includes things we actually buy 17. Intermediate Good/Material Goods—semi-finished products, used as inputs in the production of other goods including final goods 18. Capital Good—tangible assets that an organization uses to produce goods or services in order to produce consumer goods & goods for other businesses 19. Total Economy – people, material goods, capital goods, and education 20. GDP per capita—better way to measure how well off people are than GDP. 21. Diminishing Marginal Product of Labor—each extra worker adds less than the one before, but no one hurts 22. Economic Growth—an increase in GDP per capita 23. Consumer Price Index (CPI)—(1) set a basket of goods—some group/list of goods (2) find the prices (3) calculate the cost of the basket (4) set a base year & calculate CPI Graphs:


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