AGEC 217 Final Exam Study Guide
GDP Growth Rate=
(Y2-Y1)/Y2
Ex. (2014-2013)/(2014)
real GDP=
nominal GDP/deflator (difference from base year of 100)
inflation rate=
percent change in price index from one year to there
=(CPI1-CPI2)/(CPI2)
unemployment rate=
percentage change of unemployed people in the labor force
=# of unemployed/total labor force
what does BAA-AAA interest rate spread measure?
-measures the difference between two interest rates, which can indicate the attitude of lenders
-measure of optimism or pessimism of financial markets
Real interest rate=
the nominal interest rate charged by lenders minus the expected inflation rate
What are some characteristics of the BAA-AAA interest spread rate?
-spread gets bigger during or after recessions
-AAA is for less risky corps, BAA is for more risky corps.
-spread is usually above 1% when lenders are pessimistic
-less than 1% lenders are more likely to lend
-lenders lend to less risky when they are pessimistic so interest rates paid by less risky
businesses fall and more risky rise causing an increase in spread.
-expansion usually encourages lenders to lend to risky businesses so the spread gets smaller
law of demand
people will buy less of a product if it costs more and buy more if it costs less
, law of diminishing return
adding additional resources to production eventually produces fewer and fewer added
products.
equilibrium price=
Quantity demanded=quantity supplied
When is there surplus?
when price is above EQ price
When is there a shortage?
when price is below EQ price
What are the demand determinants?
Income, Prices of Other Goods, Taste and Preferences, Population, and Expectations
What are normal goods?
demand increases when income increases, and falls when income decreases
What are inferior goods?
goods that consumers buy when less income increases.
demand increases when income decreases
what are compliments?
ex) ^ P of Peanut Butter =>
v D of Jelly
What are substitutes?
ex) ^ P of Butter =>
^ D of Margarine
What are the supply determinants?
Costs of Resources or Inputs, Technology, Natural Conditions, Number of Firms and Expectations
What does Elasticity measure?
the size of the response of one variable to another.
If quantity changes a lot, then demand is elastic. if it changes only a little, then its inelastic
GDP Growth Rate=
(Y2-Y1)/Y2
Ex. (2014-2013)/(2014)
real GDP=
nominal GDP/deflator (difference from base year of 100)
inflation rate=
percent change in price index from one year to there
=(CPI1-CPI2)/(CPI2)
unemployment rate=
percentage change of unemployed people in the labor force
=# of unemployed/total labor force
what does BAA-AAA interest rate spread measure?
-measures the difference between two interest rates, which can indicate the attitude of lenders
-measure of optimism or pessimism of financial markets
Real interest rate=
the nominal interest rate charged by lenders minus the expected inflation rate
What are some characteristics of the BAA-AAA interest spread rate?
-spread gets bigger during or after recessions
-AAA is for less risky corps, BAA is for more risky corps.
-spread is usually above 1% when lenders are pessimistic
-less than 1% lenders are more likely to lend
-lenders lend to less risky when they are pessimistic so interest rates paid by less risky
businesses fall and more risky rise causing an increase in spread.
-expansion usually encourages lenders to lend to risky businesses so the spread gets smaller
law of demand
people will buy less of a product if it costs more and buy more if it costs less
, law of diminishing return
adding additional resources to production eventually produces fewer and fewer added
products.
equilibrium price=
Quantity demanded=quantity supplied
When is there surplus?
when price is above EQ price
When is there a shortage?
when price is below EQ price
What are the demand determinants?
Income, Prices of Other Goods, Taste and Preferences, Population, and Expectations
What are normal goods?
demand increases when income increases, and falls when income decreases
What are inferior goods?
goods that consumers buy when less income increases.
demand increases when income decreases
what are compliments?
ex) ^ P of Peanut Butter =>
v D of Jelly
What are substitutes?
ex) ^ P of Butter =>
^ D of Margarine
What are the supply determinants?
Costs of Resources or Inputs, Technology, Natural Conditions, Number of Firms and Expectations
What does Elasticity measure?
the size of the response of one variable to another.
If quantity changes a lot, then demand is elastic. if it changes only a little, then its inelastic
