GDP Components
This component represents the largest portion of GDP in most market economies.
Consumption
In the basic circular flow model, these are the two primary groups that interact to exchange goods, services, and resources.
Households and firms
This is the term for GDP measured at current market prices.
Nominal GDP
Calculate the total GDP if:
Consumption (C) = $500
Investment (I) = $150
Gov. Spending (G) = $100
Exports = $50
Imports = $70
$730
In a closed economy, ————– is not included
Net export
New residential housing is categorized under this component of GDP.
Investment
When a household provides labor to a firm in the Factor Market, the "flow" they receive back in return is called this.
Wages
This formula is used to calculate the GDP Deflator.
(Nominal GDP/Real GDP)*100
A farmer sells wheat to a miller for $10. The miller turns it into flour and sells it to a baker for $25. The baker makes bread and sells it to a customer for $40. What is the total contribution to GDP?
$40
If the marginal propensity to consume is 0.75, the marginal propensity to save is
0.25
These types of goods, used in the production of final goods, are excluded from GDP to avoid double counting.
Intermediate goods
This "leakage" specifically refers to money spent by domestic residents on foreign-produced goods.
Imports
If Nominal GDP grows by 5% and prices grow by 2%, this is the approximate growth in Real GDP
3%
An individual earns a gross salary of $5,000. They pay $1,000 in personal income taxes and receive $200 in government unemployment benefits. What is their Disposable Personal Income (DPI)?
$4,200
The word Macro was first used in Economics by:
Ragnar Frisch in 1933.
This is the result when a country’s imports exceed its exports.
Trade Deficit / Negative Net Exports
Taxes and Savings are examples of these in the circular flow.
Leakages
This specific type of index is used to adjust GDP for changes in the cost of living.
Consumer Price Index / CPI
A country’s Nominal GDP grew from $200 billion to $240 billion in one year. If the GDP Deflator for that year is 120, what is the Real GDP?
$200 billion
The Laffer curve shows that, in some circumstances, the government can reduce a tax on a good and increase the
Total Tax Revenue
This is the formula for GDP using the expenditure approach.
Y = C + I + G + NX
This identity states that in a closed economy with no government, Savings (S) must equal this.
Investment (I)
If the GDP Deflator increases by 10% while Nominal GDP only increases by 5%, what has happened to the Real GDP of that country? (Increase or decrease)
Decrease
Oh, you’re brave! Most people hide in the 100-point row.
Hope the teacher agrees to give 500 points to you guys!
The three main tools of monetary policy are
Open Market Operations (OMO)
Discount rate
Reserve Requirements