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Exam 1 review

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  • 1. ECO 202 Macroeconomics Exam 1 Review
  • 2. Percentage Change new - old x 100 = old (add %)
  • 3. new - old = old new _– old = old old new _– 1 = old
  • 4. Type of Functions Linear Cyclical Seasonal Volatile Exponential
  • 5. Linear - Line
  • 6. Cyclical - Cycle
  • 7. Seasonal - Cycle Jan April July Oct
  • 8. Volatile - Big Swings
  • 9. Exponential 1,000,000 750,000 500,000 250,000 0
  • 10. Log Convert Exponential to Linear 1,000,000 100,000 10,000 1,000 100 10 1 Make the scale exponential
  • 11. Chapter 23 GDP GDP Per Capita GDP Deflator
  • 12. Chapter 23 Gross Domestic Product abbreviation definition equation
  • 13. GDP Gross Domestic Product The market value of all final goods and services produced in a country in a given time
  • 14. Market Value What something would sell for
  • 15. All Everything except... Stuff you don’t sell
  • 16. Final Intermediate Final Avoid double-counting
  • 17. Intermediate Final
  • 18. Goods and Services
  • 19. Goods Services
  • 20. Produced New Stuff Does not include the sale of used goods
  • 21. Within a Country
  • 22. In a given period of time Year Y/Y Quarter Q/Q Annualized: Q x 4
  • 23. How do you calculate GDP? Equation
  • 24. GDP = C = Consumption I = Investment G = Government X = Exports M = Imports
  • 25. GDP = C + I + G + (X - M)
  • 26. Consumption Spending by households on goods and services, except new housing
  • 27. Investment Spending on capital equipment, inventories, and structures, including new housing
  • 28. Government Spending on goods and services from local, state, and federal governments.
  • 29. Net Exports Exports minus imports
  • 30. GDP Per Capita = GDP Population
  • 31. GDP Per Capita best measure of relative economic condition
  • 32. GDP Deflator measure of changes in the price level ! Base Year
  • 33. GDP Deflator deflates price inflation
  • 34. GDP Deflator Nominal GDP X 100 Real GDP
  • 35. Inflation Rate GDPD Year 2 - GDPD Year 1 GDPD Year 1 X 100 (add %)
  • 36. GDP Inflation Rate GDPD Year 2 - GDPD Year 1 GDPD Year 1 Year 1 = 240 276 - 240 Year 2 = 276 240 = 15% 36 240 X 100 X 100 X 100
  • 37. Recession Two consecutive quarters of negative GDP growth
  • 38. Chapter 24 Consumer Price Index CPI
  • 39. CPI a measure of the overall cost of goods and services bought by a typical consumer
  • 40. GDP Deflator vs. CPI GDP is everything produced CPI is just what consumers buy
  • 41. Inflation and GDP Deflator and CPI Import inflation will affect CPI but on GDP Deflator
  • 42. CPI Steps 1. Fix the basket 2. Find the prices 3. Compute cost 4. Choose base year and compute index 5. Compute inflation rate
  • 43. CPI Price this year X 100 Price in the base year
  • 44. CPI Inflation Rate CPI Year 2 - CPI Year 1 X 100 CPI Year 1 Year 1 = 130 143 - 130 Year 2 = 143 130 = 10% 13 130 X 100 X 100
  • 45. Problems with CPI substitution bias new goods quality changes
  • 46. What increased more: Salary or CPI? Year 1990 CPI 130 Salary 50,000 2014 225 100,000 % Change 73% 100%
  • 47. What increased more: Salary or CPI? Year 1990 CPI 130 Salary 50,000 2014 225 75,000 % Change 73% 50%
  • 48. What increased more: Salary or CPI? Year 1990 CPI 130 Salary 50,000 2014 225 86,538 % Change 73% 73%
  • 49. If you loan some one 100 riyals for one year and the inflation rate is 13 percent, how many riyals should you ask for in return?

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