Final

Question 1

Aggregate Expenditures

Answer 1

The sum of all the expenditures undertaken in the economy by the factors during a specific time period

Question 2

Aggregate Income

Answer 2

Paid income to the owners of the factors of production

Question 3

% Change Formula

Answer 3

(Current - Previous)/Previous * 100

Question 4

Nominal

Answer 4

At current prices

Question 5

Real

Answer 5

Adjusted for inflation

Question 6

Nominal GDP

Answer 6

Σ(Pcur * Qcur)

Question 7

Real GDP

Answer 7

Σ(Pbase * Qcur)

Question 8

GDP Deflator

Answer 8

NGDP/RGDP * 100

Question 9

g(annual)

Answer 9

(1+gqtr)^4-1

Question 10

CPI

Answer 10

Cost Basket Cur/Cost Basket Base

Question 11

Problems with CPI

Answer 11

Substitution Bias
New Goods
Quality Changes

Question 12

Calculating new price

Answer 12

$OldYear (CPInew / CPIold)

Question 13

Unemployment Rate

Answer 13

U/LF

Question 14

Labor Force Participation Rate

Answer 14

LF/Adult Pop

Question 15

Why is there unemployment

Answer 15

1. Business Cycle
2. Min Wage
3. Unions
4. Efficiency Wages
5. Increase in technology
6. Job Search

Question 16

y

Answer 16

Y/L or AK^α

Question 17

k

Answer 17

K/L

Question 18

i (Realized Investment)

Answer 18

i=sy

Question 19

Δk

Answer 19

Δk = sy - (n + d)k

Question 20

Required Investment

Answer 20

(n + d)k

Question 21

Golden rule of capital

Answer 21

maximize consumption (Afk - (n+d)/k)

Question 22

MPK

Answer 22

n+d

Question 23

Function of Money

Answer 23

Store of Value

Medium of Exchange

Unit of account

Question 24

S

Answer 24

(Y-T-C) + (T-G)

Question 25

M^s (money supply)

Answer 25

Currency + Demand Deposits
C+D

Question 26

Monetary Base MB

Answer 26

C+R

Question 27

m (money multiplier)

Answer 27

1/rr

Question 28

D

Answer 28

mR

Question 29

Open Market Purchase

Answer 29

MB up MS up

Question 30

Open Market Sale

Answer 30

MB Down MS Down

Question 31

Raise reserve requirement

Answer 31

MB unchanged MS down

Question 32

Lower reserve requirement

Answer 32

MB unchanged MS up

Question 33

Raise Discount Rate

Answer 33

MB up MS up

Question 34

Lower Discount Rate

Answer 34

MB Down MS Down

Question 35

Problems with controlling money supply

Answer 35

Can’t control how much people deposite
Can’t control how much people lend

Question 36

V

Answer 36

V=PY/M

Question 37

Quantity theory of money

Answer 37

MV=PY

M= Money Supply
V= Velocity of Money
P=Price Level
Y=GDP

Question 38

μ (percent change in money supply)

Answer 38

pi + g

Question 39

Fisher effect

Answer 39

tendency for nominal interest rates to change to follow the inflation rate. r = i - pi