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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?