MACROECONOMIC REVIEW

1)  The section of economics we are currently studying is called ___Measuring economic performance______.

2)  On the circular flow, the two types of markets are ___factor market______and the ______product______market. The ___product market______is characterized by the exchanging of finished goods and services for revenue. The ______factor ______market is characterized as the exchange of the factors of production (land, labor, capital, and ideas) for wages, interest, rent, and profit.

3)  GDP stands for ____Gross Domestic Product______and measures the value of all _____new or final______goods and services produced and sold within the ______country’s______boundaries over the course of ____1______year.

4)  The output-expenditure model of calculating GDP is the sum of ______expenditures (goods and services bought)______by households, __consume______by businesses, _invest in capital______spending, and the foreign sector (______exports______minus ____imports______).

5)  The 7 main types of things that are not included in GDP include

  1. ______foreign______
  2. ______last years______
  3. _____intermediate goods____
  4. ______used______
  5. ______illegal______
  6. ______externalities_
  7. ______personal use/leisure____

6)  Of the following items, tell me if they are included in GDP and what component of GDP they will fall under (refer to question 4)

  1. A used Tundra I buy no because its used
  2. A new suit purchased by an accountant yes its new
  3. Government buying new police cars yes govt. buying final good
  4. Honda (Japanese owned) building a US Plant no because the final product is not ours although an intermediate good(land) was used but it’s not counted.
  5. Medicare check from the government no because these transfer payments are a way of allocating money to reach social goals

7)  When we look at GDP, we want to use a standard year of prices to compare values across times (this year is often called the base year). When we adjust for inflation, the new value is called ______real______GDP, while the value calculated by using the current year’s prices is called ______nominal______GDP.

8)  CPI stands for ______Consumer price index and is used to measure the change in ______price____ of a “market basket” of goods.

9)  The formula to calculate CPI is (nominal GDP divided by real GDP) * 100. Using this formula, complete the following chart. Also, when you are finding the percentage change of anything (in this case CPI), the formula to use is

  1. % change = (difference in 2 values / the value where you started) * 100

Year / Nominal GDP / Real GDP / CPI
1970 / 560 / 674 / 83
1980 / 660 / 660 / 100
1990 / 780 / 745 / 104
2000 / 964 / 765 / 126
2005 / 1025 / 865 / 118

10)  The current CPI today is ___233.049 (all items unadjusted index dec 2013) __ (you will have to use the following link: http://www.bls.gov/news.release/cpi.toc.htm (make sure you are using Table 1)

11)  Using the following link provided, tell me the following

  1. The base year ______1982______
  2. 3 foods used in the basket _____Cereals, meat and dairy______
  3. Which single item has the most relative importance shelter at 31.933______

12)  What are the 3 types of unemployment?

  1. ______frictional______, ___structural______, _____cyclical______

13)  Match-up the following descriptions with the type of unemployment that exists.

  1. College grad looking for first job _____frictional_
  2. Assembly line worker replaced by robot ______structural_
  3. Someone fired because of a lack of need ______cyclical__
  4. Someone quitting their job looking for new one __frictional______
  5. Someone declined for a job because of a lack of skills ____structural

14)  GDP per capita is one of the most commonly used economic indicators when comparing countries (although most economist don’t like it). The formula is very simple, take the real GDP and divide by population. Knowing this, complete the following chart.

Year / Real GDP / Population / RGDP / per capita / % change in RGDP
1990 / 25,600 / 100 / 256 / n/a
1995 / 260 / 6 %
2000 / 29,650 / 249
2005 / 165 / 4 %

15)  Give me three reasons why the CPI is not considered a very good measure for inflation (you will need to use the following link:

http://www.sparknotes.com/economics/macro/measuring1/section2.rhtml

the substitution bias, the introduction of new items, and quality changes

16)  The three broad economic goals are as follows: ___economic growth______, ___full employment______, and _____price stability.