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26 Cards in this Set
- Front
- Back
GDP
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market value of all final good and services produced w/in a country in a given period of time
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factors of production
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what you need to produce something (labor, capital, natural resources)
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intermediate goods
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used as components or ingredients in production of other goods
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final goods
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intended for user
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What makes up GDP?
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measured within geographic territory, doesn't matter who is producing
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What makes up GNP?
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gross ntl. product- whatever citizens of a country produce, geography doesn't matter
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income expediture identity
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Y= C + I + G + NX
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C
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Consumption
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G
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gov. purchases
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I
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investment
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NX
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net exports (exports- imports)
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transfer payments
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payments made by gov. to households
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nominal GDP
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values output using current prices
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Real GDP
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values output using prices of base year
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GDP deflator formula
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100 X (nominal GDP/ real GDP)----- measure of overall level of prices
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inflation rate formula
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100 X ((GDP deflator last year- GDP deflator this year)/ GDP deflator this year)
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CPI
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measure of overall cost of goods and services bought by typical consumer
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5 steps to calculate CPI
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1. fix the basket
2. find prices 3. compute total basket cost 4. choose base yr. and compute index 5. compute inflation rate |
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inflation rate formula
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100 X ((CPI this year- CPI last year)/CPI last year)
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CPI formula
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100 X (cost of basket in current year/ cost of basket in base year)
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substitution bias
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consumers substitute towards goods that become relatively cheaper
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Correcting variables for inflation formula
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Amount in year T dollars X (CPI today/ CPI in year T)
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indexation
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a dollar amount is indexed for inflation if it's automatically corrected for inflation by law or in contract
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real interest rate formula
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nominal interest rate- inflation rate
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nominal interest rate
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not corrected for inflation, rate of growth of your dollar in a deposit or debt
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real interest rate
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corrected for inflation, rate of growth of the purchasing power of a deposit or debt
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