Gross Domestic Product
A US-based company manufactures computers in the US and sells them to consumers in Canada. Which component of US GDP (C, I, G, or NX) will this sale be included in?
Net Exports (NX) (specifically Exports EX).
What is the formula for the annual growth rate of a variable Y from one year (t−1) to the next year (t)?
gt=[(Yt−Yt-1)/Yt-1]×100
In the standard Aggregate Production Function Y=F(A,K,L), which input is subject to diminishing marginal returns?
Capital (K) (and also Labor (L)).
What category of unemployment results from the normal time it takes for workers to search for a job that best suits their skills and tastes?
Frictional Unemployment.
What is the primary function of a "price index" (like the CPI or GDP Deflator) when economists measure inflation?
To measure the average price of goods and services in the economy.
A nation has C=250, I=60, G=80, and Net Exports (NX) of −10. What is the calculated GDP (Y)?
380
A country's real GDP per capita is growing at a consistent rate of 3.5% per year. Approximately how many years will it take for the real GDP per capita to double?
20 years
If a country's capital stock is K=500 and the depreciation rate (δ) is 8%, what is the total amount of capital that depreciates in that period?
40
If the total civilian noninstitutional population is 200 million, the number of employed workers is 110 million, and the number of unemployed workers is 10 million, what is the Labor Force Participation Rate (LFPR) as a percentage?
60%
A fixed basket of goods costs $1,500 in the base year and $1,800 in the current year. What is the value of the Price Index in the current year? (The base year index is 100).
120
What is the term for the value of new factories, machinery, and equipment purchased by firms, which is a key component of Investment (I)?
Fixed Investment (or Business Fixed Investment).
Economic growth is generally seen as the primary driver of improvements in which societal measure?
Standards of living (or societal well-being/wealth).
What term is used to describe the state in the Solow model where the amount of new investment (or saving) exactly offsets the amount of depreciated capital, meaning the capital stock remains constant (ΔK=0)?
Steady State.
Which type of unemployment is associated with the short-term fluctuations of the business cycle (i.e., it rises during recessions and falls during expansions)?
Cyclical Unemployment.
If the Consumer Price Index (CPI) increases from 160 to 168 in one year, what is the annual inflation rate (as a percentage)?
5%
If a used car dealer purchases a vehicle for $15,000 and then spends $500 to detail and certify it before selling it for $17,000, how much value does this entire transaction add to the current year's GDP?
$2,000
Name three (3) of the primary factors, or "inputs," that determine a nation's ability to produce goods and services and drive long-run economic growth.
Productivity/Ideas (A), Capital (K), and Labor (L).
A country has capital K1=800, an investment rate of s=20%, and a depreciation rate of δ=10%. What is the value of the capital stock at the beginning of the next period (K2)?
880
What is the term for the sum of frictional and structural unemployment, representing the unavoidable or "normal" level of unemployment in a healthy economy?
The Natural Rate of Unemployment.
What is the name of the "classical" economic theory, attributed to David Hume, that states prices increase proportionally to the changes in the money supply?
The Quantity Theory of Money.
Name the two most common approaches (or methods) used to calculate GDP.
The Expenditure Approach and The Income Approach.
True or False: Economic growth has historically been evenly distributed across all nations, leading to global convergence in wealth and living standards.
False.
According to the Solow Model, what is the ultimate source of long-run economic growth (i.e., what allows for perpetual growth in the model)?
New Ideas / Productivity / Technology (A).
Why does an increase in the number of discouraged workers cause the official unemployment rate to fall?
Discouraged workers are no longer counted in the Labor Force.
The difference between the CPI and the GDP Deflator is primarily that the CPI measures prices for goods bought by consumers, while the GDP Deflator measures prices for all goods and services that make up what?
Domestically produced final goods and services (GDP).