unit 2 test

Question 1

CPI

Answer 1

Consumer Price Index
price of market basket/price of base year market basket X 100

Question 2

Inflation rate

Answer 2

Recent year - Old year/Old year X 100

Question 3

Real GDP

Answer 3

Base price X current quantity
OR
Nominal GDP X 100/GDP Deflator

Question 4

GDP Deflator

Answer 4

Nominal GDP/Real GDP X 100

Question 5

Nominal GDP

Answer 5

Deflator X Real GDP/100

Question 6

Real Income

Answer 6

Nominal Income/Price Index (hundredths)

Question 7

Real Interest Rate

Answer 7

nominal interest rate - inflation rate

Question 8

Price Change

Answer 8

Change in CPI/Beginning of CPI X 100

Question 10

Real GDP per capita

Answer 10

Real GDP/population

Question 11

Inflation

Answer 11

an increase in the economy’s price level (weighted average)

leads to decreasing in money purchasing power

Question 12

two types of inflation

Answer 12

demand pull
cost push

Question 13

demand pull

Answer 13

too much money chasing little goods
creates overheated economy with excess spending and the same amount of goods

Question 14

cost push

Answer 14

major cause is a supply shock
creates negative supply shock = price rise and quantity falls

Question 15

three names for cost push

Answer 15

stagflation, negative supply shock, cost push

Question 16

CPI definition

Answer 16

used to measure consumer inflation
market basket approach - more than 300 goods typically purchased by urban customer

Question 17

CPI weakness

Answer 17

ignores substitution, quality changes, new products

Question 18

PPI definition

Answer 18

measures the cost of a typical basket of goods and services
raw commoditites
PPI shows inflation quicker than CPI

Question 19

unemployment rate formula

Answer 19

of unemployed/labor force X 100

Question 20

labor force formula

Answer 20

labor force/population 16 and older X 100

Question 21

Who wins in inflation

Answer 21

those with large debts
borrowers at a fixed interest rate
fixed payments
businesses when price of product rises faster than price of resources

Question 22

who loses in inflation

Answer 22

large cash savings
lenders at low fixed interest rate
receiving fixed payments (retired people)

Question 23

nominal wage

Answer 23

wage measured by dollars without inflation

Question 24

real wage

Answer 24

wage adjusted with inflation

Question 25

nominal interest rate

Answer 25

interest rate actually paid for a loan i%= r% + pi%

Question 26

real Interest rate

Answer 26

r%= i% - pi%

Question 27

cost of inflation

Answer 27

menu costs shoe leather costs unit of account costs

Question 28

menu costs

Answer 28

cost money to change listed prices

Question 29

shoe leather costs

Answer 29

the ghost of transactions increase people reduce their real money holdings so they must spend more time and effort making additional trips to the bank

Question 30

unit of account costs

Answer 30

money doesn't reliably measure the value of goods/services

Question 31

disinflation

Answer 31

prices increase at a slower rate good for economy refered as price stability

Question 32

deflation

Answer 32

negative inflation rate prices fall bad for economy (hoard money and hurt GDP)

Question 33

income formula of GDP

Answer 33

R+W+I+P rent wages interest profit

Question 34

Expenditure formula of GDP

Answer 34

C+Ig+G+Xn Consumer Spendings Gross Private Investments Government Spendings Net Exports

Question 35

GDP Growth formula

Answer 35

New GDP-Old GDP/Old GDP X 100

Question 36

4 types of unemployment

Answer 36

frictional structural cyclical seasonal

Question 37

what isn't included in GDP

Answer 37

black market activity non market affiliated activity used or intermediate goods made out of country transfer payments stocks and bonds

Question 38

what is included in GDP

Answer 38

new goods and serives Buisness productivity (C+Ig+G+Xn)

Question 39

3 ways to measure inflation

Answer 39

CPI PPI GDP Deflator (the best one)

Question 40

draw a demand pull graph

Question 41

draw a cost push graph

Question 42

natural unemployment formula

Answer 42

frictional and structural unemployment

Question 43

actual unemployed formula

Answer 43

natural and cyclical unemployment

Question 44

3 leakages

Answer 44

imports taxes savings

Question 45

3 injections

Answer 45

exports investments (capital in a business) government spendings

Question 46

draw business cycle

Question 47

deficit budget

Answer 47

amount spent by government is more than collected in taxes more expenditure than revenue

Question 48

surplus budget

Answer 48

amount spent by government is less than collected in taxes more revenue than expenditure

Question 49

draw circular flow model

Question 50

hyperinflation

Answer 50

when the value of money is worth nothing, since prices rise too high