ECON 2120 Final Study Guide Questions &
Answers QUESTIONS & ANSWERS
what is macro?
the study of aggregate economy, including topics such as inflation, unemployment, and
economic growth
what is micro?
the study of how individuals and households make choices, interact in markets, and how govt
influences their choices
what does GDP stand for?
gross domestic product
what is GDP?
market value of all FINAL goods and services produced in a country during a period of time
GDP is measured using ____________, not ___________
market values, not quantities
GDP uses only _______ production
current
GDP only includes production _____________ a country
within
GDP measures total ______________ and total __________
,production (expenditure) and income
what is the GDP formula?
Y = C (consum) + I (investment) + G (govt purch) + NX (exports - imports)
what 3 things are included in consumption?
- services
- nondurable goods
- durable goods
what is the largest component of GDP?
consumption
what 3 things are included in investment?
- business fixed investment
- residential investment
- changes in business inventory (produced one year, sold another)
what does not contribute to GDP under govt purchases?
transfer payments
GDP does not capture these 5 things:
- household production
- the underground economy (black market)
- leisure and human costs
, - pollution or other negative effects of production
- changes in crime and other social problems
what is nominal GDP?
the value of final goods and services expressed in CURRENT year prices
what is real GDP?
the value of final goods and services expressed in BASE year prices
what does real GDP adjust for the effects of?
inflation
does nominal GDP adjust for the effects of inflation?
NO
in years after the base year, is nominal GDP or real GDP greater and why?
nominal GDP is greater than real GDP; prices typically rise over time, so nominal GDP would be
higher because it would be using current year prices, not base year (it is ahead of time of the real
GDP)
in years before the base year, is nominal GDP or real GDP greater and why?
real GDP is greater than real; prices typically rise over time, so real GDP would be higher
because it would be using the base year prices, not current (it is ahead of time of the nominal
GDP)
how do you calculate economic growth?
Answers QUESTIONS & ANSWERS
what is macro?
the study of aggregate economy, including topics such as inflation, unemployment, and
economic growth
what is micro?
the study of how individuals and households make choices, interact in markets, and how govt
influences their choices
what does GDP stand for?
gross domestic product
what is GDP?
market value of all FINAL goods and services produced in a country during a period of time
GDP is measured using ____________, not ___________
market values, not quantities
GDP uses only _______ production
current
GDP only includes production _____________ a country
within
GDP measures total ______________ and total __________
,production (expenditure) and income
what is the GDP formula?
Y = C (consum) + I (investment) + G (govt purch) + NX (exports - imports)
what 3 things are included in consumption?
- services
- nondurable goods
- durable goods
what is the largest component of GDP?
consumption
what 3 things are included in investment?
- business fixed investment
- residential investment
- changes in business inventory (produced one year, sold another)
what does not contribute to GDP under govt purchases?
transfer payments
GDP does not capture these 5 things:
- household production
- the underground economy (black market)
- leisure and human costs
, - pollution or other negative effects of production
- changes in crime and other social problems
what is nominal GDP?
the value of final goods and services expressed in CURRENT year prices
what is real GDP?
the value of final goods and services expressed in BASE year prices
what does real GDP adjust for the effects of?
inflation
does nominal GDP adjust for the effects of inflation?
NO
in years after the base year, is nominal GDP or real GDP greater and why?
nominal GDP is greater than real GDP; prices typically rise over time, so nominal GDP would be
higher because it would be using current year prices, not base year (it is ahead of time of the real
GDP)
in years before the base year, is nominal GDP or real GDP greater and why?
real GDP is greater than real; prices typically rise over time, so real GDP would be higher
because it would be using the base year prices, not current (it is ahead of time of the nominal
GDP)
how do you calculate economic growth?
