GDP
How do we calculate GDP
Y=C+I+G+(X-M)
Alex's shopping basket cost $35 in 2023, and ROSE TO $42.75 in 2024. Please calculate inflation in terms of % change from 2023 to 2024
(New-Old)/Old= (42.75-37)/37= 15.5%
Which of the following would be considered in the labor force:
a full-time college student, an active-duty Marine, a stay-at-home father, or a retail clerk who was just laid off and is applying for new jobs?
The clerk
2 reasons why a dollar today is more valuable than a dollar tomorrow
The future is uncertain and nobody likes waiting
Correctly draw and label the market for loanable funds. Label both axes and all curves
*graph*
Name 2 types of wealth GDP cannot account for
Leisure time, natural resources, resale goods, illegal goods
How is CPI different from the GDP deflator?
CPI does not take into account government spending
Match the following two scenarios to their specific type of unemployment:
1.) Structural unemployment
2.) Frictional unemployment
If a bank offers you a nominal interest rate of 8%, but the current inflation rate is 5%, what is your real interest rate?
(8%-5%)=3% real interest
Correctly draw and label the market for loanable funds (axes and curves) if the real wealth in an area increases
supply shifts outward
If the government collects $200 in taxes and spends $500 this year, the government has a ___________
($300) deficit
In 1976, the CPI was 33. Today, the CPI is 280. If an average NFL player makes $2 million today, what would their salary have needed to be in 1976 to have the exact same level of "real wealth"?
Approximately $235,714
In the town of Coolsville, there is a total population of 1,000 people. The population includes 40 students, 8 prisoners, 32 retirees, 20 active military, and 40 stay-at-home parents. Using these figures, what is the Labor Force Participation Rate (LFPR)?
(1000-140)/1000= 86%
You place $100 into a savings account with a 3% annual interest rate. How much money will you have in that account after 5 years?
$ 115.93 using compounding interest
After Godzilla attacks, investor confidence plummets because people are worried about their businesses being crushed in the next fight. Show this shift on your graph.
Supply shifts inwards
This type of good is non-rival in consumption but excludable. What type of good is this and give an example?
Club goods
Write out the formula for the quantity theory of money
PY=MV
According to the Phillips Curve, what is the standard economic "trade-off" a government faces if they choose to print more money to combat a high unemployment rate?
Higher inflation
You are the CEO of a company and you can invent a product that will cost $10,000 today. But you estimate that it will generate $800 in revenue every year afterwards forever. Given a 5% real interest rate what is the NPV?
($800/.05)-$10,000=$6,000
After Godzilla attacks the U.S., and the government must borrow massive amounts of money via bonds to pay for reconstruction. Illustrate this shift on your whiteboard. What is the final effect on the quantity of loans funded and the real interest rate?
Both increase as demand shifts outward
An engineer makes an engine and sells it to a mechanic for $800. Mechanic combines it with car and sells it to dealership for $2000. Dealership bundles it with warranty and service agreement and sells car for $2400. What did each person add to GDP?
Engineer=$800
Mechanic=$1200
Dealership= $400
TOTAL GDP =$2400
If the velocity of money does not change and the money supply doubles, what will happen to prices if output also doubles
Nothing
Start with a Labor Force of 860 people. If a recession hits and 86 people lose their jobs, but then 50 of them find new work and 16 of them become "disgruntled" and stop looking for work entirely, what is the new Unemployment Rate?
First, the 16 "disgruntled" workers are removed from the Labor Force entirely (860 - 16 = 844)
Second, identify the remaining unemployed who are still looking (20 people)
Finally, divide the unemployed by the new labor force (20 / 844) to get 2.37%
You are the CEO of a company and you have the option of making a product that will cost $10,000 today. It will make $500 a year forever. What is the critical interest rate for you to make this product?
>5%
As the CEO of Kaiba Corp you know the critical interest rate for your duel disk project is >8%. If government spending increases, what will happen to the liklihood that you invest in the duel disk project and make them. Use a graph to explain what will happen and name this term
Crowding out= government spending increases real interest rate past critical interest rate for private businesses.