ECON 301 Exam 2025 Questions and
Answers
What is the concept of market clearing models? - --CORRECT ANSWER--
Markets will eventually adjust to the equilibrium price over time
Why are market clearing models useful? - --CORRECT ANSWER--Prices may be
slow to change, but markets will adjust to the equilibrium price
GDP definition - --CORRECT ANSWER--(1) total income of everyone in the
economy,
(2) total expenditure on the economy's output of goods and services.
(3) value of all final goods and services produced in the economy
~ all within a given time frame
GDP (in circular model) - --CORRECT ANSWER--GDP measures the flow of
dollars in an economy from households to firms and back.
- income for labor
- expenditure on goods
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,Stock - --CORRECT ANSWER--quantity measured at a given point in time
e.g. Zoe's income on April 14th 2024
Flow - --CORRECT ANSWER--Quantity measured per unit of Time
e.g. U.S. GDP was $22 trillion in 2020 (22 trillion per year at 2020)
Transactions not included in GDP - --CORRECT ANSWER--- used goods
- transactions out of inventory
- intermediate goods (e.g. raw materials)
- underground economy
-transfer payments
-unreported income
-work for which no money changed hands
Inventory - --CORRECT ANSWER--National income treats inventory items as
items the firm has "purchased" for inventory. It will be counted as an expenditure.
e.g. Ford sells 2020 car in 2021. 2021 Consumption increases & 2020 GDP
increases
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
,Imputations - --CORRECT ANSWER--estimated values for goods or services that
are not sold in the marketplace
e.g. Housing: GDP includes estimates of rent as home owners "paying" themselves
"rent". This imputed rent would be included in both expenditure and income in
the GDP
Underground economy - --CORRECT ANSWER--illegal economic activities or
unreported legal activities that are not accounted for in national economic
measures
e.g. black market, illegal workers, etc.
Nominal GDP - --CORRECT ANSWER--Value of goods and services measured
at current prices.
Real GDP - --CORRECT ANSWER--Value of goods and services using a
constant set of prices.
* this allows us to interpret variations in GFP as variations in economic
productivity
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, How to calculate real GDP - --CORRECT ANSWER--1) Determine base-year
prices by calculating GDP at base year
2) Real GDP of following year would be calculated using quantity of following year
* price at base year.
GDP Deflator - --CORRECT ANSWER--Nominal GDP/Real GDP x 100
Measures the price of output relative to tis price in the base year
Chain-Weighted Measures of Real GDP - --CORRECT ANSWER--Updating
"base-year" over time to keep price level comparison to date
Percentage Change Laws - --CORRECT ANSWER--%change(AxB) =
%change(A) + %change(B)
%change(Y/L) = %change(Y) - %change(L)
Components of Expenditure - --CORRECT ANSWER--Consumption (C)
Investment (I)
Government Purchases (G)
Net Exports (NX)
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 4
Answers
What is the concept of market clearing models? - --CORRECT ANSWER--
Markets will eventually adjust to the equilibrium price over time
Why are market clearing models useful? - --CORRECT ANSWER--Prices may be
slow to change, but markets will adjust to the equilibrium price
GDP definition - --CORRECT ANSWER--(1) total income of everyone in the
economy,
(2) total expenditure on the economy's output of goods and services.
(3) value of all final goods and services produced in the economy
~ all within a given time frame
GDP (in circular model) - --CORRECT ANSWER--GDP measures the flow of
dollars in an economy from households to firms and back.
- income for labor
- expenditure on goods
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
,Stock - --CORRECT ANSWER--quantity measured at a given point in time
e.g. Zoe's income on April 14th 2024
Flow - --CORRECT ANSWER--Quantity measured per unit of Time
e.g. U.S. GDP was $22 trillion in 2020 (22 trillion per year at 2020)
Transactions not included in GDP - --CORRECT ANSWER--- used goods
- transactions out of inventory
- intermediate goods (e.g. raw materials)
- underground economy
-transfer payments
-unreported income
-work for which no money changed hands
Inventory - --CORRECT ANSWER--National income treats inventory items as
items the firm has "purchased" for inventory. It will be counted as an expenditure.
e.g. Ford sells 2020 car in 2021. 2021 Consumption increases & 2020 GDP
increases
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
,Imputations - --CORRECT ANSWER--estimated values for goods or services that
are not sold in the marketplace
e.g. Housing: GDP includes estimates of rent as home owners "paying" themselves
"rent". This imputed rent would be included in both expenditure and income in
the GDP
Underground economy - --CORRECT ANSWER--illegal economic activities or
unreported legal activities that are not accounted for in national economic
measures
e.g. black market, illegal workers, etc.
Nominal GDP - --CORRECT ANSWER--Value of goods and services measured
at current prices.
Real GDP - --CORRECT ANSWER--Value of goods and services using a
constant set of prices.
* this allows us to interpret variations in GFP as variations in economic
productivity
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 3
, How to calculate real GDP - --CORRECT ANSWER--1) Determine base-year
prices by calculating GDP at base year
2) Real GDP of following year would be calculated using quantity of following year
* price at base year.
GDP Deflator - --CORRECT ANSWER--Nominal GDP/Real GDP x 100
Measures the price of output relative to tis price in the base year
Chain-Weighted Measures of Real GDP - --CORRECT ANSWER--Updating
"base-year" over time to keep price level comparison to date
Percentage Change Laws - --CORRECT ANSWER--%change(AxB) =
%change(A) + %change(B)
%change(Y/L) = %change(Y) - %change(L)
Components of Expenditure - --CORRECT ANSWER--Consumption (C)
Investment (I)
Government Purchases (G)
Net Exports (NX)
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 4
