Intermediate Macroeconomics Exam Revision questions with answers

Aggregate output: • National income accounts - ________________ system - used to measure aggregate economic activity • Key measures: - gross domestic product (GDP) - gross domestic income (GDI) - GDP ___ GDI, by construction - __________ variables, aggregate output per year (or per quarter, etc) accounting, =, flow • Three ways to measure aggregate output: GDP is the 1. total value of the __________ goods and services produced 2. total __________-added 3. total ___________ in the economy during a given period • Definitions 1-2 are the _______________ side of the accounts (GDP) • Definition 3 is the income side of the accounts (GDI) Valuation occurs at ____________ prices hence does not provide a full picture of welfare or inequality. final, value, income, production, market Nominal GDP: Sum of quantities times ______________ prices where prices denominated in dollars. Real GDP: Sum of quantities times constant prices. Want to control for change in ________________ power of a dollar. Choice of prices defines __________ year. For that year, nominal and real GDP are equal current, purchasing, base • Inflation is sustained increase in general level of prices ("the price level") - inflation _________ is percent change in price level • Deflation is sustained ______________ in general level of prices -GDP deflator Pt measures average __________ of aggregate output • CPI measures average price of a consumption basket • CPI and GDP deflator usually move ______________ over time rate, decrease, price, together