Exam 2 - ECN 211 ASU UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS
Microeconomics the study of how individual households and firms make decisions and how they
interact with one another in markets
, Macroeconomics the study of the economy as a whole
What is the goal of macroeconomics? to explain changes that affect many households, firms, and markets
simultaneously
GDP deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP
times 100
GDP deflator formula GDP deflator = (Nominal GPD / Real GDP) * 100
What is GDP? GROSS DOMESTIC PRODUCT
the market value of all final goods and services produced within a country in a
given period of time
GDP formula GDP = consumption + investment + gov purchases + net exports
What is the specific interval of time usually when a year or quarter (3 months)
measuring GDP?
How does the government usually present GDP? "at an annual rate"
i.e. the amount of income and expenditure during the quarter (3 moths) * 4 =
figure recorded for quarterly GDP
What two things does GDP measure at once? 1. the total income of everyone in the economy
2. the total expenditure on the economy's output of goods and services
*For an economy as a whole, income must = expenditure
How does GDP measure the value of economic activity? market prices
market prices measure the amount people are willing to pay for different goods
(i.e. if the price of an apple is twice the price of an orange, then the apple
contributes twice as much to GDP as does an orange)
TRUE/FALSE: FALSE
Vegetables you grow in your garden are part of GDP *GDP excludes most items produced and sold illicitly, such as illegal drugs, as well
as most items that are produces and consumed at home (buying vegetables at the
store vs growing own garden)
TRUE/FALSE: TRUE
when international paper makes paper, which Hallmark
then uses to make a greeting card, the paper is called an
intermediate good and the card is called a final good
intermediate good *already assumed to be included in price of final good unless "final" for the
moment when added to firms inventory for later use
Microeconomics the study of how individual households and firms make decisions and how they
interact with one another in markets
, Macroeconomics the study of the economy as a whole
What is the goal of macroeconomics? to explain changes that affect many households, firms, and markets
simultaneously
GDP deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP
times 100
GDP deflator formula GDP deflator = (Nominal GPD / Real GDP) * 100
What is GDP? GROSS DOMESTIC PRODUCT
the market value of all final goods and services produced within a country in a
given period of time
GDP formula GDP = consumption + investment + gov purchases + net exports
What is the specific interval of time usually when a year or quarter (3 months)
measuring GDP?
How does the government usually present GDP? "at an annual rate"
i.e. the amount of income and expenditure during the quarter (3 moths) * 4 =
figure recorded for quarterly GDP
What two things does GDP measure at once? 1. the total income of everyone in the economy
2. the total expenditure on the economy's output of goods and services
*For an economy as a whole, income must = expenditure
How does GDP measure the value of economic activity? market prices
market prices measure the amount people are willing to pay for different goods
(i.e. if the price of an apple is twice the price of an orange, then the apple
contributes twice as much to GDP as does an orange)
TRUE/FALSE: FALSE
Vegetables you grow in your garden are part of GDP *GDP excludes most items produced and sold illicitly, such as illegal drugs, as well
as most items that are produces and consumed at home (buying vegetables at the
store vs growing own garden)
TRUE/FALSE: TRUE
when international paper makes paper, which Hallmark
then uses to make a greeting card, the paper is called an
intermediate good and the card is called a final good
intermediate good *already assumed to be included in price of final good unless "final" for the
moment when added to firms inventory for later use
