Chapter 2

Question 1

What is the fundamental identity of national income accounting

Answer 1

aggregate production = aggregate income = aggregate expenditure = Y = GDP

Question 2

What is the production function?

Answer 2

Y = Af(L,K)

Question 3

What are NFP?

Answer 3

Net factor payments from abroad:
income paid to domestic factors of production from rest of world - income paid to foreign factors of production by us

Question 4

GNP =

Answer 4

GDP + NFP

Question 5

Expenditure Formula GDP

Answer 5

Y = C + I + G + NX

Question 6

What is PDI?

Answer 6

Private Disposable Income
Y + NFP - T + TR + INT

Question 7

What is NGI?

Answer 7

Net Government Income
T - TR - INT

Question 8

What is Wealth?

Answer 8

Assets - Liabilities

Question 9

What is Saving?

Answer 9

Current Income - Current Consumption

Question 10

What is the Government Balance?

Answer 10

T - (G + TR + INT)

Question 11

What is CA?

Answer 11

Current Account Balance
Payments received from abroad for exports - payments made to foreigners for imports
NX + NFP

Question 12

What are the uses of Savings?

Answer 12

S = I + CA

Question 13

What is Private Savings?

Answer 13

Sp = I + CA - Sg

Question 14

What is the Inflation Rate?

Answer 14

ΔP/P

Question 15

What is the Real Interest Rate?

Answer 15

r = i - π

Question 16

How do you calculate chained-dollar real GDP

Answer 16

1. g1 = P₁Q₂ / P₁Q₁
2. g2 = P₂Q₂ / P₂Q₁
3. Fischer = √(g1g2)
4. RGDP₂ = Fischer * GDP₁