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MBA Econ FINAL Exam Questions & Answers 2024/2025

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MBA Econ FINAL Exam Questions & Answers 2024/2025 What does GDP measure? Four Components of GDP? - ANSWERSTotal income of everyone in the economy and total expenditure on goods and services. - Total expenditure= total income (because every dollar spent somewhere goes to someone) - Four comp...

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  • November 13, 2024
  • 12
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • MBA Econ
  • MBA Econ
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MBA Econ FINAL Exam Questions &
Answers 2024/2025

What does GDP measure? Four Components of GDP? - ANSWERSTotal income of everyone in the
economy and total expenditure on goods and services.

- Total expenditure= total income (because every dollar spent somewhere goes to someone)

- Four components of GDP:

1. Consumption (largest segment)

2. Investment

3. Government Spending (2nd largest segment)

4. Net Exports (smallest segment)

Y= C + I + G + NX



Consumption - ANSWERSTotal spending of households on goods and services.

- Housing cost: for renters it includes rent payments, and for homeonwers it includes the imputed rental
value of the house but not the purchase price or mortage payments.



Investment - ANSWERSTotal spending on goods that will be used to produce future goods.

- Includes spending on capital equipment, structures (facorites, office buildings, houses), inventories
(goods produced but not sold yet)

- NOT stocks and bonds and financial assets.



Government purchases - ANSWERSAll goods and services purchased by the government at the state,
local, and fedral level.

- Excludes transfer payments, such as SS and unemployment benefits



Net Exports - ANSWERSExports-Imports.

- Exports represent foreign spending on the economy's goods and services

- Imports are portions of C, I, and G spent on goods from abroad.

, Real Vs Nominal GDP - ANSWERS- Nominal: Values output using current prices, not corrected for
inflation. Changes in nominal GDP reflect changes in prices and quantities produced

- Real: values prices using the prices of a base year. Is corrected for inflation.



Example of real and nominal GDP:

Two products in the Pasadena economy: mangoes and caterpillars

Mangoes Caterpillars

PQPQ

2011 10 400 2 1000

2012 11 500 2.5 1,100

2013 12 600 3 1,200

- Compute nominal GDP for each year

- Compute Real GDP for each year.

- Compute Price level (as measured by GDP deflator) each year - ANSWERS- 6,000; 8,250 ; 10,800

- 6000; 7,200; 8,400

- 100 , 115; 129



GDP Deflator - ANSWERS- Nominal GDP/Real GDP X 100

- Measure of the overall level of prices

- One way to measure the inflation rate is to compute the % change in price level (as measured by GDP
deflator) from one year to the next.



GDP and Economic Well Being - ANSWERSReal GDP per capita is the best indicator of the average
person's standard of living. BUT, its not perfect. Doesn't measrue....

- Quality of the enviroment

- Leisure time

- Non-market activity like childcare

- Equitable distribution of income

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