PRINCIPLES OF ECONOMICS EXAM B EXAM
REVIEW SOLVED QUESTIONS WITH ACCURATE
ANSWERS
◉ transfer payments.
Answer: payments that transfer income from one person to another
(e.g. social security, Medicare), not included in G because this
spending does not result in the production of new G&S
◉ Net Exports (NX).
Answer: exports - imports
◉ exports.
Answer: G&S that are produced domestically in the US and
purchased by foreign buyers
◉ imports.
Answer: G&S produced overseas and purchased by domestic buyers
◉ Measuring GDP: Total Spending.
Answer: add up every dollar of spending; Y = C+I+G+NX ("Gross
Domestic Product")
,◉ Measuring GDP: Total Output.
Answer: add up every dollar's worth of output produced; "Sum of
Value Added"
◉ Value Added.
Answer: the amount by which the value of an item is increased at
each stage of production (i.e. total sales - costs of intermediate
inputs)
◉ Measuring GDP: Total Income.
Answer: add up every dollar of income earned; total wages + total
profits ("Gross Domestic Income"), capital gains and losses not
counted
◉ Limitations of GDP.
Answer: DOES NOT INCLUDE: 1. non-market activities (i.e.
household chores) 2. Shadow economy (i.e. illegal drugs) 3.
environmental degradation (i.e. pollution) 4. Leisure, Volunteerism,
etc. 5. ignores distribution of G&S
◉ Higher GDP....
Answer: better health, higher life expectancy, more happiness
, ◉ Nominal GDP.
Answer: GDP measured in today's prices; Nominal GDP = P x Q
◉ Real GDP.
Answer: GDP measured in constant prices, excludes the effects of
price changes; Average Price = 0.5 x (Pt + Pt-1) --> Real GDP =
Average P x Q
◉ Growth rate.
Answer: new - old / old
◉ % change nominal GDP.
Answer: % change in real GDP + % change in Price
◉ working age population (POP).
Answer: those age 16+ who are not in the military or
institutionalized (e.g. nursing home, prison)
◉ employed (E).
Answer: working age population who are working, self-employed,
and/or temporarily absent from their job
◉ unemployed (U).
REVIEW SOLVED QUESTIONS WITH ACCURATE
ANSWERS
◉ transfer payments.
Answer: payments that transfer income from one person to another
(e.g. social security, Medicare), not included in G because this
spending does not result in the production of new G&S
◉ Net Exports (NX).
Answer: exports - imports
◉ exports.
Answer: G&S that are produced domestically in the US and
purchased by foreign buyers
◉ imports.
Answer: G&S produced overseas and purchased by domestic buyers
◉ Measuring GDP: Total Spending.
Answer: add up every dollar of spending; Y = C+I+G+NX ("Gross
Domestic Product")
,◉ Measuring GDP: Total Output.
Answer: add up every dollar's worth of output produced; "Sum of
Value Added"
◉ Value Added.
Answer: the amount by which the value of an item is increased at
each stage of production (i.e. total sales - costs of intermediate
inputs)
◉ Measuring GDP: Total Income.
Answer: add up every dollar of income earned; total wages + total
profits ("Gross Domestic Income"), capital gains and losses not
counted
◉ Limitations of GDP.
Answer: DOES NOT INCLUDE: 1. non-market activities (i.e.
household chores) 2. Shadow economy (i.e. illegal drugs) 3.
environmental degradation (i.e. pollution) 4. Leisure, Volunteerism,
etc. 5. ignores distribution of G&S
◉ Higher GDP....
Answer: better health, higher life expectancy, more happiness
, ◉ Nominal GDP.
Answer: GDP measured in today's prices; Nominal GDP = P x Q
◉ Real GDP.
Answer: GDP measured in constant prices, excludes the effects of
price changes; Average Price = 0.5 x (Pt + Pt-1) --> Real GDP =
Average P x Q
◉ Growth rate.
Answer: new - old / old
◉ % change nominal GDP.
Answer: % change in real GDP + % change in Price
◉ working age population (POP).
Answer: those age 16+ who are not in the military or
institutionalized (e.g. nursing home, prison)
◉ employed (E).
Answer: working age population who are working, self-employed,
and/or temporarily absent from their job
◉ unemployed (U).
