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19 Cards in this Set

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  • Back

What are the three fundamental assumptions in economics?

rational economic behavior (MB > MC), self-interest, and incentive

Draw the circular flow model.

Which variable is the most important to growth?

Investment

Describe the economy in terms of variables.

T + S + M = G + I + X

Define GDP

GDP: The market value of all measurable final goods and services produced domestically.

Define market value

Price + tax paid by consumer

Define measurable

Not underground

Final goods / service

Only counted once at end

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

Two components of consumption?

Income


Wealth

Consumption % of GDP

70

Measures of inflation?

CPI


PPI


WPI (wholesale price index, leading indicator)


GDP Deflator

Spending multiplier

1 / (1- MPC)

Okun's Law

Unemployment rate and growth rate are indirectly connected

Disposable Income

the income that remains once consumers have received transfers and paid their taxes

C(o)

Autonomous consumption

What is Y(d) equal to?

Y - T (income minus taxes)

Z = (two expansions)

Z = C + I + G


Z = C(o) + C(1)(Y-T) + I + G

When dealing with porportional taxes, what formula is very important?

MPC' = MPC * (1 - t)