Econ 111 Final Exam questions well
answered graded A+
What are the 3 Macroeconomic Goals? - correct answer ✔✔1. Economic Growth
2. Price Stability
3. Full Employment
Long run trend or "Potential GDP" associated (3%)
Remember-more stuff per person means a higher standard of living
GDP= another name for aggregated supply
C+G+I+(Xg-M)= another name for aggregated demand - correct answer ✔✔Economic Growth
Why the continued growth of the economy? - correct answer ✔✔US is very (x10) good at
producing stuff and has continued to get even better
Why are we so good at producing stuff? - correct answer ✔✔We have high worker productivity
What are the Determinants of Worker Productivity? - correct answer ✔✔1. Educated, healthy,
skilled workers, and parents--HUMAN CAPITAL
2. Quality capital and technology
3. Incentives provided by a market economy
Parents make us productive, make us go to school, etc.
U.S. has a 99% literacy rate
-85% of those over 25 have a HS degree (some only 60-65%) - correct answer ✔✔Educated,
healthy, skilled workers, and parents--HUMAN CAPITAL
,% of population that has completed the fourth grade - correct answer ✔✔Literacy Rate
Tools, equipment, buildings, ability, skill, creativity to innovate
Develop sophisticated production methods
New technologies are the single most important source of productivity improvement - correct
answer ✔✔Quality capital and technology
No one works harder than when working for themselves/their family
W/ strong legal and social framework
-encourages productivity and entrepreneurship
Are necessary to reward risk taking
The ability to earn profit, high wages, and own property are powerful incentives in market
economies - correct answer ✔✔Incentives provided by a market economy
How is price stability measured? - correct answer ✔✔Inflation Rate
% increase from one year to the next in the average prices of goods and services in the typical
market basket for average consumer
-"market basket"=shopping cart
-taking prices every month on the same items
-data available monthly from the BLS (Bureau of Labor Statistics) - correct answer ✔✔Inflation
Rate
Most common used measure of inflation rate - correct answer ✔✔Consumer Price Index (CPI)
"All items less food and energy"
, -take out food and energy bc fluctuates the most - correct answer ✔✔Core CPI
How much inflation is too much? Too little? - correct answer ✔✔Comfort level for most
economists are ok with 2% (The goal is to reach 2%)
Falling price level-DEFLATION NOT GOOD
-cell phone plans are contributing to this bc competing
Real vs Nominal, whats the big deal?
(Remember real means adjusted) - correct answer ✔✔Assume you get a 3% raise and you know
that the inflation rate is 3%
What is the real value of your raise? 0
How did we get that answer? - correct answer ✔✔Nominal rate= 3%
Inflation rate= 3%
____________________________
Real Rate
21% (prime interest rate)
14% (CPI)
_________________
7% (real rate) - correct answer ✔✔7% is the "real burden of debt"
This is a burden for the borrower, for the lender it is the "real return"
2.05% - correct answer ✔✔Very unusual "zero" real interest in some markets
Trying to anticipate inflation is very important
answered graded A+
What are the 3 Macroeconomic Goals? - correct answer ✔✔1. Economic Growth
2. Price Stability
3. Full Employment
Long run trend or "Potential GDP" associated (3%)
Remember-more stuff per person means a higher standard of living
GDP= another name for aggregated supply
C+G+I+(Xg-M)= another name for aggregated demand - correct answer ✔✔Economic Growth
Why the continued growth of the economy? - correct answer ✔✔US is very (x10) good at
producing stuff and has continued to get even better
Why are we so good at producing stuff? - correct answer ✔✔We have high worker productivity
What are the Determinants of Worker Productivity? - correct answer ✔✔1. Educated, healthy,
skilled workers, and parents--HUMAN CAPITAL
2. Quality capital and technology
3. Incentives provided by a market economy
Parents make us productive, make us go to school, etc.
U.S. has a 99% literacy rate
-85% of those over 25 have a HS degree (some only 60-65%) - correct answer ✔✔Educated,
healthy, skilled workers, and parents--HUMAN CAPITAL
,% of population that has completed the fourth grade - correct answer ✔✔Literacy Rate
Tools, equipment, buildings, ability, skill, creativity to innovate
Develop sophisticated production methods
New technologies are the single most important source of productivity improvement - correct
answer ✔✔Quality capital and technology
No one works harder than when working for themselves/their family
W/ strong legal and social framework
-encourages productivity and entrepreneurship
Are necessary to reward risk taking
The ability to earn profit, high wages, and own property are powerful incentives in market
economies - correct answer ✔✔Incentives provided by a market economy
How is price stability measured? - correct answer ✔✔Inflation Rate
% increase from one year to the next in the average prices of goods and services in the typical
market basket for average consumer
-"market basket"=shopping cart
-taking prices every month on the same items
-data available monthly from the BLS (Bureau of Labor Statistics) - correct answer ✔✔Inflation
Rate
Most common used measure of inflation rate - correct answer ✔✔Consumer Price Index (CPI)
"All items less food and energy"
, -take out food and energy bc fluctuates the most - correct answer ✔✔Core CPI
How much inflation is too much? Too little? - correct answer ✔✔Comfort level for most
economists are ok with 2% (The goal is to reach 2%)
Falling price level-DEFLATION NOT GOOD
-cell phone plans are contributing to this bc competing
Real vs Nominal, whats the big deal?
(Remember real means adjusted) - correct answer ✔✔Assume you get a 3% raise and you know
that the inflation rate is 3%
What is the real value of your raise? 0
How did we get that answer? - correct answer ✔✔Nominal rate= 3%
Inflation rate= 3%
____________________________
Real Rate
21% (prime interest rate)
14% (CPI)
_________________
7% (real rate) - correct answer ✔✔7% is the "real burden of debt"
This is a burden for the borrower, for the lender it is the "real return"
2.05% - correct answer ✔✔Very unusual "zero" real interest in some markets
Trying to anticipate inflation is very important
