Exam 1 review

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Exam 1 review

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