GDP
How do you calculate the Real GDP with respect to a given base year?
Multiply the base year price with the current year quantity.
Skills and knowledge a person develops through education, training, and practice.
Human Capital.
Unemployment due to the time it takes for employers to search for workers and for workers to search for jobs is known as...?
Frictional Unemployment.
The acronyms C.P.I. and P.P.I. stand for what two concepts, respectively?
Consumer Price Index and Producer Price Index.
What does it mean for net exports to be negative?
Net exports are exports minus imports. If negative, it means that imports are larger than exports.
What is the main difference between Real GDP and Nominal GDP?
Nominal GDP uses current prices to value goods, whereas Real GDP uses prices from some fixed prior year.
The quantity of goods and services that each person produces per hour of work.
Labour Productivity.
Cyclical Unemployment is defined as...?
Unemployment that is due to a temporary downturn in the economy.
Inflation can be defined as...?
A generalized rise in the overall level of prices.
Unemployment that occurs because wages don’t fall to bring labour demand and supply into equilibrium is known as...?
Structural Unemployment.
Name 4 out of the 6 Limitations of GDP.
1.) Prices are not values.
2.) Nonmarket activities are excluded.
3.) The shadow economy is missing.
4.) Environmental degradation isn’t counted
5.) Leisure doesn’t count.
6.) GDP ignores distribution of income.
The total quantity of physical capital that can be used in the production of goods and services.
Capital Stock.
If the working age population is 250, and there are 78 employed and 62 unemployed, what is the participation rate?
(78 + 62) / 250 = 0.56
or
56%
If the price level rose from $158 last year to $199 this year, what is the inflation rate?
Inflation rate = [ (199 - 158) / 158 ] x 100% = 25.95%
In relation to the working-age population, each adult (age 15+) is placed into one of 3 categories. These categories are...?
Employed, Unemployed, and Not in the Labour Force.
If it takes 22.87 years for Stefan's Clout points to double, what is the DAILY growth rate?
Using Rule of 70:
22.87 = 70 / x
x = 3.061
3.061 / 365 = 0.00839
Stefan is baking cookies for his Annual Bake Sale. For last year's bake sale, he used 50 cups of cookie dough and 25 cups of chocolate chips. This year, he wants to have some leftover cookies for himself so he decides to use 150 cups of cookie dough and 75 cups of chocolate chips. This is an example of...?
Constant Returns to Scale.
If the employment rate is 65%, and the labour force population is 380, how many people are unemployed?
Unemployment rate = 35%
People unemployed = 380 x 0.35 = 133
In relation to CPI, what are the 3 problems that overstate the cost of living?
1.) Commodity substitution bias
2.) Introduction of new goods
3.) Unmeasured quality changes
In Stefan's Annual Bake sale last year, he sold 327,000 cookies priced at $1.75 each. This year, Stefan sold 456,000 cookies priced at $1.99. WOW! What is the sum of Stefan's Real GDP for this and last years' bake sales?
First find Avg. Price:
(1.99 + 1.75) / 2 = 1.87
Now calculate real GDP:
(456,000 x 1.87) + (327,000 x 1.87) = 1,464,210
Stefan's breakfast today consisted of coffee and a muffin today (not even close) and it cost him $5. He goes to his favourite vintage store where he buys a nice sweater for $45. He then goes home to spend a few hours investing in cryptocurrencies to kill the time. He ended up trading $500. After that, he goes to the neighbours house to babysit their children and receives $100 in cash for the day. Stefan also owns a small shoe selling business which has recently cost him $1365. What is Stefan's GDP?
Only add items that contribute to GDP:
5 + 500 + 1365 = 1870
Labour and Total Hours worked depend on which 4 factors?
1.) Population Size
2.) Working-age fraction of population
3.) Share of working-age people who choose to work
4.) How many hours each worker puts in
Suppose the adult population is 750 and the working-age population is 450, with 225 employed, 100 unemployed, and 125 not in the labour force. What are the Unemployment, Labour force participation, and the Employment rates?
u = [ (100) / (225 + 100) ] x 100% = 30.77%
LFPR = [ (225 + 100) / (750) ] x 100% = 43.33%
E = [ (225) / (750) ] x 100% = 30%
Suppose that in the year 2000, one cookie costs $1.75 and one small carton of milk costs $2.50. Further suppose that in 2001, a cookie cost $2.00 and a milk carton cost $2.75. Calculate the inflation rate of a basket consisting of 4 cookies and 2 milk cartons in 2001, using 2000 as a base year.
Basket Cost:
2000: (4 x 1.75) + (2 x 2.50) = $12 , 2001: (4 x 2.00) + (2 x 2.75) = $13.5
CPI (Base year 2000):
2000: (12/12) x 100 = 100, (13.5/12) x 100 = 112.5
Inflation rate:
2001: [ (112.5 - 100) / 100 ] x 100 = 12.5%
The mistaken belief that inflation destroys purchasing power is known as...?
Inflation Fallacy.