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12 Cards in this Set
- Front
- Back
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goal 1: promote economic growth
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- increase output of goods and services
- boost output per capita |
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nominal gross domestic product
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- the dollar value of FINAL output of goods and services produced in the US (over a period of time)
- how we measure the total output |
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economic growth v. inflation
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- economic growth= if output increased 10%
- inflation= if prices increased 10% |
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calculations of growth rate
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- (New-Old)/old x 100%
ex) nv= 2,200, ov= 2,000 GR= (2,200-2,000)/2000= .10 x 100%= 10% |
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nominal GDP
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- value of output calculated using prices that existed during the year when the goods and serves were produced
ex) value of output in 2005 using 2005 prices |
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consumer price index
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HOLD ITEMS IN THE MARKET CONSTANT AND CHANGE PRICES FROM YEAR TO YEAR
- chose a year as a base year - choose a representative set of quantities of items that are purchased by consumers - determine how much those quantities cost using the prices that existed during various years - ex) p0q0, p1q0, p2, q0 |
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Real GDP
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- value of OUTPUT during ANY YEAR calculated using PRICES THAT EXISTED IN SOME BASE YEAR
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calculation of real GDP given a set of prices and quantities
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- pick a base year
- use the prices during that year to determine the value of output during any year using the base year prices - result= value of output during any year is not affected by changes in prices |
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calculation of real GDP given a price index
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Real GDPi = (Nominal GDPi/Price indexi) x 100
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to determine if the QUANTITY of output increased or decreased?
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we need to compare REAL GDP from year to year.
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to promote growth
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- increase and improve physical capital (tools, machinery, computers, technology, etc.)
- full utilization of plant and equipment - improve human capital (better skills, education, and job training) - reduce unemployment |
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goal 2: maintain- SP, PPoD, LIF
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- stable prices
- purchasing power of the dollar - low inflation rate |
