Econ 104 Final – Goffe Exam Questions and Answers | 100% Pass!!

Econ 104 Final – Goffe Exam Questions and Answers | 100% Pass!! Nominal GDP -Answer-the value of final goods and services evaluated at current-year prices How to calculate nominal GDP -Answer-C + I + G +NX Real GDP -Answer-The value of final goods and services evaluated at base-year prices How to calculate real GDP -Answer-P*Q for every good in GDP and add them all together BASE YEAR 2014 - 100M visits at $50 each 2015 - 103M visits at $53 10M cars at $20,000 each 11M cars at $20,500 each real GDP for 2015: (103M * $50 + 11M * 20,000) 2015Q(1) * 2014P(1) + 2015Q(2) * 2014 P(2) Monetary Policy -Answer-federal reserve's dual mandate (which focuses on max employment, stable prices, and moderate long-term interest rates) What will result from the Fed increasing the federal rate? -Answer-Costs for banks will increase and loan rates for consumers and firms will increase. This leads to slower growth. Fiscal Policy -Answer-Controlled by the president and congress. It is the government budget. GDP Deflator -Answer-uses nominal and real GDP to measure the price level (not in dollars) Price level -Answer-The average price of all goods and services in an economy How to calculate GDP deflator -Answer-(Nominal/Real)*100 CPI -Answer-used to correct nominal prices and wages over time for the impact of inflation using market basket prices How to calculate CPI -Answer-(market base price in current year/ market basket price in base year)*100 Limitations of GDP -Answer-1. Doesn't account for change in quality. 2. Doesn't account for underground economy. 3. Doesn't account for 'bads' of economy 4. Doesn't account for non-market production Limitations of CPI -Answer-Substitution bias, increase in quality bias, new product bias, outlet bias. Core Inflation -Answer-ignores food/energy, as they can be more volatile Headline inflation -Answer-takes food and energy in to account when calculating Real prices -Answer-what would have been paid for the same good or service in the base year based on inflation Real wages -Answer-wages based on the base year Inflation rate (Calculation) -Answer-(CPI this year - CPI last year)/ CPI last year Real interest rate (calculation) -Answer-nominal interest rate - inflation rate Real interest rate -Answer-provides a better measure of the true cost of borrowing and the true rate of return of lending than nominal interest rates Money -Answer-1. Medium of exchange 2. Store of value 3. Unit of account 4. Standard of deferred payment Current Nominal GDP -Answer-$18 trillion Current Real GDP -Answer-$16.4 trillion Current GDP deflator -Answer-110 Anticipated inflation -Answer-value of money declines and menu costs need to change Unanticipated inflation -Answer-reduces real wages and real interest rates Business Cycle -Answer-alternating periods of economic expansion and economic recession Consumption -Answer-spending by households on goods and services, not including spending on new houses Economic growth -Answer-the ability of an economy to produce increasing quantities of goods and services Expansion -Answer-the period of a business cycle during which total production and total employment are increasing Final good or service -Answer-a good or service purchased by a final user Government purchases -Answer-spending by federal, state, and local governmen