ECON 104 FINAL – GOFFE EXAM 2025 UPDATED ACTUAL EXAM WITH CORRECT
SOLUTIONS.
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
, ECON 104 FINAL – GOFFE EXAM 2025 UPDATED ACTUAL EXAM WITH CORRECT
SOLUTIONS.
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
SOLUTIONS.
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
, ECON 104 FINAL – GOFFE EXAM 2025 UPDATED ACTUAL EXAM WITH CORRECT
SOLUTIONS.
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
