BADM 7200: Economics Exam Questions with Verified Solutions Latest 2025-2026
Final goods - Answers goods and services that have been purchased for final use and not for
resale or further processing or manufacturing
GDP expenditure - Answers total expenditure on domestically produced final goods and services
GDP income - Answers total income earned by domestically located factors of production
Value Added - Answers is the value of output minus the value of the intermediate goods used to
produce that output
value of final goods produced - Answers includes the value of the intermediate goods
Durable goods - Answers last a long time
Non-durable goods - Answers last a short time
services - Answers are intangible items purchased by consumers
business fixed investment - Answers business purchases of factories, offices, machinery, and
equipment
Residential fixed investment - Answers spending by consumers and landlords on housing units
inventory investment - Answers the value of the change in total inventories held in the economy
during a given period
stocks - Answers quantity measured at a point in time
flow - Answers quantity measured per unit of time
Gross National Product - Answers total income earned by the nation's factors of production,
regardless of where located
Nominal GDP - Answers measures the output of an economy valued at today's prices, or in
current dollars
Real GDP - Answers measures values using the prices of a base year
Changes in nominal GDP can be due to: - Answers changes in prices, changes in quantities of
output produced
changes in real gdp can be due - Answers more goods and services produced and sold means
we need more money (and vice versa)
Inflation Rate - Answers the percentage increase in the price level from one year to the next
GDP deflator - Answers a measure of the price level calculated as the ratio of nominal GDP to
, real GDP times 100
chain-weighted real GDP - Answers updates the base year every year, so it is more accurate than
constant-price GDP
Consumer Price Index (CPI) - Answers a measure of the overall cost of the goods and services
bought by a typical consumer
substitution bias - Answers an inflation rate calculated using a fixed basket of goods over time
tends to overstate the true rise in the cost of living, because it does not take into account that
the person can substitute away from goods whose prices rise by a lot
introduction of new goods - Answers The introduction of new goods makes consumers better
off and, in effect, increases the real value of the dollar. But it does not reduce the CPI because
the CPI uses fixed weights.
unmeasured changes in quality - Answers Quality improvements increase the value of the dollar
but are often not fully measured.
PCE deflator - Answers another measure of the price level: personal consumption expenditures
(PCE) deflator, the ratio of nominal to real consumer spending
employed - Answers working at a paid job
unemployed - Answers not employed but looking for a job
labor force - Answers the amount of labor available for producing goods and services; all
employed plus unemployed
not in the labor force - Answers not employed, not looking for work
unemployment rate - Answers the percentage of the labor force that is unemployed
labor-force participation rate - Answers fraction of the adult population that :participates" in the
labor force that is, is working or looking for work
factor prices - Answers The prices of the services of the factors of production.
marginal product of labor - Answers the extra output obtained by using one more unit of labor
The endogenous variables in this model are - Answers Price of tea and quantity of tea.
neoclassical theory of distribution - Answers states that each factor input is paid its marginal
product
Marginal Propensity to Consume (MPC) - Answers the increase in consumer spending when
disposable income rises by $1
Final goods - Answers goods and services that have been purchased for final use and not for
resale or further processing or manufacturing
GDP expenditure - Answers total expenditure on domestically produced final goods and services
GDP income - Answers total income earned by domestically located factors of production
Value Added - Answers is the value of output minus the value of the intermediate goods used to
produce that output
value of final goods produced - Answers includes the value of the intermediate goods
Durable goods - Answers last a long time
Non-durable goods - Answers last a short time
services - Answers are intangible items purchased by consumers
business fixed investment - Answers business purchases of factories, offices, machinery, and
equipment
Residential fixed investment - Answers spending by consumers and landlords on housing units
inventory investment - Answers the value of the change in total inventories held in the economy
during a given period
stocks - Answers quantity measured at a point in time
flow - Answers quantity measured per unit of time
Gross National Product - Answers total income earned by the nation's factors of production,
regardless of where located
Nominal GDP - Answers measures the output of an economy valued at today's prices, or in
current dollars
Real GDP - Answers measures values using the prices of a base year
Changes in nominal GDP can be due to: - Answers changes in prices, changes in quantities of
output produced
changes in real gdp can be due - Answers more goods and services produced and sold means
we need more money (and vice versa)
Inflation Rate - Answers the percentage increase in the price level from one year to the next
GDP deflator - Answers a measure of the price level calculated as the ratio of nominal GDP to
, real GDP times 100
chain-weighted real GDP - Answers updates the base year every year, so it is more accurate than
constant-price GDP
Consumer Price Index (CPI) - Answers a measure of the overall cost of the goods and services
bought by a typical consumer
substitution bias - Answers an inflation rate calculated using a fixed basket of goods over time
tends to overstate the true rise in the cost of living, because it does not take into account that
the person can substitute away from goods whose prices rise by a lot
introduction of new goods - Answers The introduction of new goods makes consumers better
off and, in effect, increases the real value of the dollar. But it does not reduce the CPI because
the CPI uses fixed weights.
unmeasured changes in quality - Answers Quality improvements increase the value of the dollar
but are often not fully measured.
PCE deflator - Answers another measure of the price level: personal consumption expenditures
(PCE) deflator, the ratio of nominal to real consumer spending
employed - Answers working at a paid job
unemployed - Answers not employed but looking for a job
labor force - Answers the amount of labor available for producing goods and services; all
employed plus unemployed
not in the labor force - Answers not employed, not looking for work
unemployment rate - Answers the percentage of the labor force that is unemployed
labor-force participation rate - Answers fraction of the adult population that :participates" in the
labor force that is, is working or looking for work
factor prices - Answers The prices of the services of the factors of production.
marginal product of labor - Answers the extra output obtained by using one more unit of labor
The endogenous variables in this model are - Answers Price of tea and quantity of tea.
neoclassical theory of distribution - Answers states that each factor input is paid its marginal
product
Marginal Propensity to Consume (MPC) - Answers the increase in consumer spending when
disposable income rises by $1
