Midterm

Question 1

Macroeconomic

Answer 1

The study of the entire economy
It’s purpose is to understand the entire economy’s changes that impact us

Question 2

Exogenous variables

Answer 2

• determined outside of the model
•given
•not calculated by us

Question 3

Endogenous variables

Answer 3

•variables determined inside of the model
• calculated by us using given information

Question 4

Nominal variables

Answer 4

Variables measured in current dollars
Not adjusted for inflation

Question 5

Real variables

Answer 5

Adjusted for inflation
Measured in constant dollars

Question 6

Flow variables

Answer 6

Variables that represent consistent changes per unit of time

Question 7

Stock variables

Answer 7

Variables that measure changes in quantity not over a specific period of time

Question 8

Static models

Answer 8

Doesn’t depend on how much time has passed

Question 9

Dynamic models

Answer 9

Depends on how much time has passed

Question 10

Gross domestic product

Answer 10

Final value of goods and services produced in a country in a given time

Question 11

The four categories GDP consists of:

Answer 11

1. Consumption
2. Investment
3. Government spending
4. Net exports

Question 12

Product expenditure identity

Answer 12

IM+Y=C+G+I+Ex

Y=C+G+I+(EX-IM)

Question 13

Disposable income identity

Answer 13

Yd=Y-T+TP

Question 14

Sectorial Deficit Identity

Answer 14

(G-T+TP)+(I+S)+X=0

Question 15

Inflow-Outflow identity

Answer 15

I+G+TP+EX=S+T+IM

Question 16

Price index

Answer 16

Overall measure of price level across a variety of goods

Question 17

Price index examples

Answer 17

CPI
PPI
GDP deflator

Question 18

Price factor

Answer 18

Price factor = (price index base year)/price index measured year)

Question 19

Real value (formula):

Answer 19

Real=Nominal x price factor

Question 20

CPI

Answer 20

Measures the change in price of a market basket of goods and services over time.

Question 21

Included in GDP

Answer 21

Must include only transactions that are truly exchanges

Question 22

GDP doesn’t include:

Answer 22

1. Secondhand sales
2. Transfer payments
3. Intermediate goods
4. Under the table transactions

Question 23

What is GDP used for?

Answer 23

GDP is used as a standardized measurement to calculate the size of an economy.
• the percentage change of GDP can tell us the growth of the economy

Question 24

Recession

Answer 24

2 consecutive quarters of negative economic growth

Question 25

Depression

Answer 25

4 consecutive quarters of negative economic growth

Question 26

What does the production function measure?

Answer 26

The production function measured the relationship between inputs and outputs. Inputs include: Capital stock Labor Technology

Question 27

Diminishing marginal products

Answer 27

After a certain point continuing to add units of labor does not bring additional units of output

Question 28

Cobb-Douglass production function

Answer 28

F(K,L,A)= AK^ㅇL^(1-ㅇ)

Question 29

What does “A” stand for?

Answer 29

Is the measure of technology sometimes called the total factor productivity Measure of the multiple of production

Question 30

Marginal product of labor (MPL)

Answer 30

How much additional output do we get when adding one more unit of labor

Question 31

Marginal product of capital

Answer 31

How much additional output do we get when we add one more unit of capital

Question 32

Factors of production are:

Answer 32

All the things brought together to aid in the production of goods and services Knowledge Capital Entrepreneurship Labor Land