ECON 2120 EXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026
What is GDP? - Answers Market value of all final goods and services produced within a country in a
year
Why are prices used in GDP? - Answers To compare different goods/services
What are intermediate goods? - Answers Inputs used to produce final goods
What are final goods? - Answers Goods sold to consumers
Why exclude intermediate goods? - Answers To avoid double counting
What is double counting? - Answers Counting the same value multiple times
What is the spending formula for GDP? - Answers C + I + G + (X − M)
What is consumption (C)? - Answers Household spending
What is investment (I)? - Answers Spending on capital goods
What is government spending (G)? - Answers Government purchases
What are net exports? - Answers Exports minus imports
What is NOT included in GDP? - Answers Transfers, used goods, non-market activity
What is nominal GDP? - Answers Uses current prices
What is real GDP? - Answers Adjusted for inflation
Why is economic growth important? - Answers Improves standard of living
What is GDP per capita? - Answers GDP per person
What is the Great Fact? - Answers Growth was flat until around 1800 then rapidly increased
Why are some countries richer? - Answers Institutions, incentives, geography
What is the growth rate formula? - Answers (New − Old) divided by Old times 100
Why do growth rates matter? - Answers Small differences compound over time
What is the production function? - Answers Y = F(A, K, eL)
What is K? - Answers Physical capital
What is eL? - Answers Human capital times labor
What is A? - Answers Technology or ideas
What is catching-up growth? - Answers Growth from capital accumulation
What is cutting-edge growth? - Answers Growth from innovation
What are diminishing returns? - Answers Each additional unit of capital adds less output
Who is unemployed? - Answers Someone without a job who is actively looking for work
What is the labor force? - Answers Employed plus unemployed
What is the unemployment rate formula? - Answers Unemployed divided by labor force times 100
Who is not in the labor force? - Answers Not working and not looking
What is frictional unemployment? - Answers Short-term job search unemployment
What is structural unemployment? - Answers Mismatch between skills and jobs
What is cyclical unemployment? - Answers Unemployment due to recessions
What is the natural rate of unemployment? - Answers Frictional plus structural unemployment
What is the labor force participation rate? - Answers Labor force divided by adult population
What is the loanable funds market? - Answers Market where saving meets borrowing
What is the supply of loanable funds? - Answers Saving
What is the demand for loanable funds? - Answers Investment
What determines saving? - Answers Time preference, income, expectations
What is time preference? - Answers Preference for present consumption over future
Higher time preference leads to what? - Answers Less saving
What is consumption smoothing? - Answers Saving to maintain stable consumption over time
What does the interest rate do? - Answers Balances saving and investment
What is a financial asset? - Answers A non-physical asset like stocks or bonds
What is a physical asset? - Answers A real asset like machines or buildings
What is the Efficient Market Hypothesis? - Answers Prices reflect all available information
What is passive investing? - Answers Following a market index
What is active investing? - Answers Trying to beat the market
Why is it hard to beat the market? - Answers Information is already reflected in prices
What is inflation? - Answers Increase in the average price level
What is deflation? - Answers Decrease in the average price level
What is a price index? - Answers A measure of the price level
What is CPI? - Answers Consumer Price Index
What is the CPI formula? - Answers Current basket cost divided by base basket cost times 100
Why keep quantities constant in CPI? - Answers To compare prices only
What is the Quantity Theory of Money? - Answers MV = PY
What is GDP? - Answers Market value of all final goods and services produced within a country in a
year
Why are prices used in GDP? - Answers To compare different goods/services
What are intermediate goods? - Answers Inputs used to produce final goods
What are final goods? - Answers Goods sold to consumers
Why exclude intermediate goods? - Answers To avoid double counting
What is double counting? - Answers Counting the same value multiple times
What is the spending formula for GDP? - Answers C + I + G + (X − M)
What is consumption (C)? - Answers Household spending
What is investment (I)? - Answers Spending on capital goods
What is government spending (G)? - Answers Government purchases
What are net exports? - Answers Exports minus imports
What is NOT included in GDP? - Answers Transfers, used goods, non-market activity
What is nominal GDP? - Answers Uses current prices
What is real GDP? - Answers Adjusted for inflation
Why is economic growth important? - Answers Improves standard of living
What is GDP per capita? - Answers GDP per person
What is the Great Fact? - Answers Growth was flat until around 1800 then rapidly increased
Why are some countries richer? - Answers Institutions, incentives, geography
What is the growth rate formula? - Answers (New − Old) divided by Old times 100
Why do growth rates matter? - Answers Small differences compound over time
What is the production function? - Answers Y = F(A, K, eL)
What is K? - Answers Physical capital
What is eL? - Answers Human capital times labor
What is A? - Answers Technology or ideas
What is catching-up growth? - Answers Growth from capital accumulation
What is cutting-edge growth? - Answers Growth from innovation
What are diminishing returns? - Answers Each additional unit of capital adds less output
Who is unemployed? - Answers Someone without a job who is actively looking for work
What is the labor force? - Answers Employed plus unemployed
What is the unemployment rate formula? - Answers Unemployed divided by labor force times 100
Who is not in the labor force? - Answers Not working and not looking
What is frictional unemployment? - Answers Short-term job search unemployment
What is structural unemployment? - Answers Mismatch between skills and jobs
What is cyclical unemployment? - Answers Unemployment due to recessions
What is the natural rate of unemployment? - Answers Frictional plus structural unemployment
What is the labor force participation rate? - Answers Labor force divided by adult population
What is the loanable funds market? - Answers Market where saving meets borrowing
What is the supply of loanable funds? - Answers Saving
What is the demand for loanable funds? - Answers Investment
What determines saving? - Answers Time preference, income, expectations
What is time preference? - Answers Preference for present consumption over future
Higher time preference leads to what? - Answers Less saving
What is consumption smoothing? - Answers Saving to maintain stable consumption over time
What does the interest rate do? - Answers Balances saving and investment
What is a financial asset? - Answers A non-physical asset like stocks or bonds
What is a physical asset? - Answers A real asset like machines or buildings
What is the Efficient Market Hypothesis? - Answers Prices reflect all available information
What is passive investing? - Answers Following a market index
What is active investing? - Answers Trying to beat the market
Why is it hard to beat the market? - Answers Information is already reflected in prices
What is inflation? - Answers Increase in the average price level
What is deflation? - Answers Decrease in the average price level
What is a price index? - Answers A measure of the price level
What is CPI? - Answers Consumer Price Index
What is the CPI formula? - Answers Current basket cost divided by base basket cost times 100
Why keep quantities constant in CPI? - Answers To compare prices only
What is the Quantity Theory of Money? - Answers MV = PY
