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19 Cards in this Set
- Front
- Back
What are the three fundamental assumptions in economics? |
rational economic behavior (MB > MC), self-interest, and incentive |
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Draw the circular flow model. |
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Which variable is the most important to growth? |
Investment |
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Describe the economy in terms of variables. |
T + S + M = G + I + X |
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Define GDP |
GDP: The market value of all measurable final goods and services produced domestically. |
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Define market value |
Price + tax paid by consumer |
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Define measurable |
Not underground |
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Final goods / service |
Only counted once at end |
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What are the three ways to measure GDP? |
Sum of spending C + I + G + NX Sum of value added: value of final goods - value of intermediary goods Sum of income: labor + capital income |
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Two components of consumption? |
Income Wealth |
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Consumption % of GDP |
70 |
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Measures of inflation? |
CPI PPI WPI (wholesale price index, leading indicator) GDP Deflator |
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Spending multiplier |
1 / (1- MPC) |
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Okun's Law |
Unemployment rate and growth rate are indirectly connected |
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Disposable Income |
the income that remains once consumers have received transfers and paid their taxes |
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C(o) |
Autonomous consumption |
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What is Y(d) equal to? |
Y - T (income minus taxes) |
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Z = (two expansions) |
Z = C + I + G Z = C(o) + C(1)(Y-T) + I + G |
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When dealing with porportional taxes, what formula is very important? |
MPC' = MPC * (1 - t) |