UGBA 101b EXAM 1 REVIEW
Endogenous variables - correct answer variables that a model tries to explain
Exogenous variables - correct answer autonomous factors that come from outside a theoretical model or
system and that cannot be explained by the system
GDP - correct answer Y = C + I + G + NX
G includes - correct answer spending on goods and services: for example - purchases of
trains/installation of subway rail.
G excludes - correct answer transfer payments (unemployment) bc they do not represent spending on
goods/services. Transfer payments are also excluded from GDP, though such payments may fund
consumption and indirectly contribute to GDP.
GDP deflator - correct answer a measure of the price level calculated as: 100 x (nominal GDP/real GDP)
Consumer Price Index (CPI) - correct answer a measure of the overall cost of the goods and services
bought by a typical consumer
Issues with CPI - correct answer CPI generally overstates inflation. CPI uses fixed weights, so it cannot
reflect consumers' ability to substitute toward goods whose relative prices have fallen.
CPI vs GDP Deflator - correct answer CPI is fixed, GDP deflator changes every year.
PCE deflator - correct answer The ratio of nominal to real consumer spending. Includes imported goods.
Core inflation - correct answer CPI minus food and energy costs
, Closed economy - correct answer does not trade with other countries
Production function - correct answer shows how much output (Y) the economy can produce from K units
of capital and L units of labor
Y = F(K,L)
GDP - correct answer output is determined by fixed factor supplies and fixed state of technology
MPL= - correct answer change in output(Q)/ change in labor (L)
MPK (marginal product of capital) - correct answer change in Q/change in K
Total capital income - correct answer MPK x K
Disposable income - correct answer Total income - taxes
Investment function - correct answer I = I(r)
where r denotes the real interest rate, (as I increases, r decreases)
Supply of Loanable funds - correct answer comes from saving
Private saving = - correct answer (Y-T) - C
Public Saving = - correct answer T - G
National Saving, S = - correct answer Y-C-G
if T > G - correct answer budget surplus
Endogenous variables - correct answer variables that a model tries to explain
Exogenous variables - correct answer autonomous factors that come from outside a theoretical model or
system and that cannot be explained by the system
GDP - correct answer Y = C + I + G + NX
G includes - correct answer spending on goods and services: for example - purchases of
trains/installation of subway rail.
G excludes - correct answer transfer payments (unemployment) bc they do not represent spending on
goods/services. Transfer payments are also excluded from GDP, though such payments may fund
consumption and indirectly contribute to GDP.
GDP deflator - correct answer a measure of the price level calculated as: 100 x (nominal GDP/real GDP)
Consumer Price Index (CPI) - correct answer a measure of the overall cost of the goods and services
bought by a typical consumer
Issues with CPI - correct answer CPI generally overstates inflation. CPI uses fixed weights, so it cannot
reflect consumers' ability to substitute toward goods whose relative prices have fallen.
CPI vs GDP Deflator - correct answer CPI is fixed, GDP deflator changes every year.
PCE deflator - correct answer The ratio of nominal to real consumer spending. Includes imported goods.
Core inflation - correct answer CPI minus food and energy costs
, Closed economy - correct answer does not trade with other countries
Production function - correct answer shows how much output (Y) the economy can produce from K units
of capital and L units of labor
Y = F(K,L)
GDP - correct answer output is determined by fixed factor supplies and fixed state of technology
MPL= - correct answer change in output(Q)/ change in labor (L)
MPK (marginal product of capital) - correct answer change in Q/change in K
Total capital income - correct answer MPK x K
Disposable income - correct answer Total income - taxes
Investment function - correct answer I = I(r)
where r denotes the real interest rate, (as I increases, r decreases)
Supply of Loanable funds - correct answer comes from saving
Private saving = - correct answer (Y-T) - C
Public Saving = - correct answer T - G
National Saving, S = - correct answer Y-C-G
if T > G - correct answer budget surplus
