Economics
What is economics?
The study of how people use limited resources to satisfy needs.
What is a bank?
A financial institution that holds money and provides loans.
Write the GDP (expenditure approach) formula and explain each part.
GDP = C + I + G + (X − M)
What is demand?
The quantity of a good people are willing and able to buy.
What is a deposit?
Money placed into a bank account.
Tell the GDP deflator formula
GDP Deflator = (Nominal GDP / Real GDP) × 100
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured at current prices, while real GDP is adjusted for inflation(measured by based year prices)
What is the primary role of a central bank?
To control monetary policy, regulate banks, and maintain financial stability.
Inflation Rate formula
Inflation Rate = ((P_current − P_previous) / P_previous) × 100%
What does the aggregate demand (AD) curve represent?
The total demand for goods and services in an economy at different price levels.
What is the difference between monetary policy and fiscal policy?
Monetary policy is controlled by the central bank (money supply, interest rates), while fiscal policy is controlled by the government (taxes and spending).
Growth Rate formula.
Growth Rate = ((Real GDP_current − Real GDP_previous) / Real GDP_previous) × 100%
What is marginal propensity to consume (MPC)
The fraction of extra income that is spent on consumption.
What is fractional reserve banking?
A system where banks keep only part of deposits and lend the rest.
Marginal Propensity to Consume (MPC) , explain all parts in words.
MPC = ΔC / ΔY