ECON 201 Test questions with
answers graded A+
GDP - ANS✅✅the market value of all final goods and services produced within a country during a
given period of time. (only new goods, not used or old ones)
market value - ANS✅✅is measured in dollars, not in the amount of "things". it is defined as the
value of what is produced (measured in dollars).
final goods - ANS✅✅does not count everything produced, but only the final goods (the goods sold
to their final users).
example of what is included in GDP - ANS✅✅100 dollars of wheat does not count in GDP, because
the wheat will transform it into flour, into a cake, and then sells the cake to a consumer. Once the
cake is sold to the consumer, then it is counted in GDP.
another example of what is included in GDP: - ANS✅✅not included: when ford buys a car battery
from an auto parts shop
included: when YOU buy a car battery from an auto parts shop
*because you are the final user of the car battery, that is included in the GDP. the ford dealership
would buy the battery, but then you would buy the car so that is not counted*
GDP is measured by: - ANS✅✅the Bureau of Economic Analysis.
Measured in three ways:
1. value-added approach
2. expenditure approach
3. sum of factor payments approach
Expenditure Approach: - ANS✅✅calculating GDP by adding the value of all final goods and services
purchased by each type of final user. Simply adding up how much money is spent on US produced
goods.
GDP formula: - ANS✅✅GDP= C+I+G+NX or C+I+G+X-M
, components of GDP formula - ANS✅✅C=consumption
I= investment
G=government
NX= net exports (can also be solved by X-M, which is exports-imports).
nominal GDP - ANS✅✅the production of goods and services valued at current prices. (number of
goods times the price they sold for)
real GDP - ANS✅✅production of goods and services valued at constant prices. (base year will give
you the price you're gonna use for calculations)
GDP chain price index: - ANS✅✅nominal gdp/real gdp times 100
inflation rate formula - ANS✅✅chain price this year-chain price last year/chain price last year
times 100
stages of business cycle: - ANS✅✅expansion, peak, recession (contraction), trough
unemployment rate formula - ANS✅✅unemployed/labor force times 100
labor force participation rate formula - ANS✅✅labor force/adult civilian population times 100
frictional unemployment - ANS✅✅people who are unemployed but looking for available jobs that
best match their skills
structural unemployment - ANS✅✅unemployed due to some shift in the economy has rendered
their current skills obsolete or no longer valued by society.
cyclical unemployment - ANS✅✅unemployment due to business cycles in the economy,
unemployed because economy is in downturn.
shortcomings of unemployment - ANS✅✅discouraged workers(looking but given up),
underemployed (wanting full-time but only finding part-time, no time frames (doesn't measure how
long someone is unemployed).
answers graded A+
GDP - ANS✅✅the market value of all final goods and services produced within a country during a
given period of time. (only new goods, not used or old ones)
market value - ANS✅✅is measured in dollars, not in the amount of "things". it is defined as the
value of what is produced (measured in dollars).
final goods - ANS✅✅does not count everything produced, but only the final goods (the goods sold
to their final users).
example of what is included in GDP - ANS✅✅100 dollars of wheat does not count in GDP, because
the wheat will transform it into flour, into a cake, and then sells the cake to a consumer. Once the
cake is sold to the consumer, then it is counted in GDP.
another example of what is included in GDP: - ANS✅✅not included: when ford buys a car battery
from an auto parts shop
included: when YOU buy a car battery from an auto parts shop
*because you are the final user of the car battery, that is included in the GDP. the ford dealership
would buy the battery, but then you would buy the car so that is not counted*
GDP is measured by: - ANS✅✅the Bureau of Economic Analysis.
Measured in three ways:
1. value-added approach
2. expenditure approach
3. sum of factor payments approach
Expenditure Approach: - ANS✅✅calculating GDP by adding the value of all final goods and services
purchased by each type of final user. Simply adding up how much money is spent on US produced
goods.
GDP formula: - ANS✅✅GDP= C+I+G+NX or C+I+G+X-M
, components of GDP formula - ANS✅✅C=consumption
I= investment
G=government
NX= net exports (can also be solved by X-M, which is exports-imports).
nominal GDP - ANS✅✅the production of goods and services valued at current prices. (number of
goods times the price they sold for)
real GDP - ANS✅✅production of goods and services valued at constant prices. (base year will give
you the price you're gonna use for calculations)
GDP chain price index: - ANS✅✅nominal gdp/real gdp times 100
inflation rate formula - ANS✅✅chain price this year-chain price last year/chain price last year
times 100
stages of business cycle: - ANS✅✅expansion, peak, recession (contraction), trough
unemployment rate formula - ANS✅✅unemployed/labor force times 100
labor force participation rate formula - ANS✅✅labor force/adult civilian population times 100
frictional unemployment - ANS✅✅people who are unemployed but looking for available jobs that
best match their skills
structural unemployment - ANS✅✅unemployed due to some shift in the economy has rendered
their current skills obsolete or no longer valued by society.
cyclical unemployment - ANS✅✅unemployment due to business cycles in the economy,
unemployed because economy is in downturn.
shortcomings of unemployment - ANS✅✅discouraged workers(looking but given up),
underemployed (wanting full-time but only finding part-time, no time frames (doesn't measure how
long someone is unemployed).
