Econ 104 Final – Goffe Questions and Correct Answer
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Course
Econ 104
Institution
Econ 104
Econ 104 Final – Goffe Questions
and Correct AnswerEcon 104 Final – Goffe Questions
and Correct AnswerEcon 104 Final – Goffe Questions
and Correct AnswerEcon 104 Final – Goffe Questions
and Correct AnswerEcon 104 Final – Goffe Questions
and Correct AnswerEcon 104 Final – Goffe...
Elscores 8/18/2024 6:16:34 PM
Econ 104 Final – Goffe Questions
and Correct Answer
Nominal GDP
~: the value of final goods and services evaluated at current-year prices
How to calculate nominal GDP
~: C + I + G +NX
Real GDP
~: The value of final goods and services evaluated at base-year prices
How to calculate real GDP
~: P*Q for every good in GDP and add them all together
BASE YEAR
2014 - 100M visits at $50 each 2015 - 103M visits at $53
10M cars at $20,000 each 11M cars at $20,500 each
real GDP for 2015: (103M * $50 + 11M * 20,000)
2015Q(1) * 2014P(1) + 2015Q(2) * 2014 P(2)
Monetary Policy
, Elscores 8/18/2024 6:16:34 PM
~: federal reserve's dual mandate (which focuses on max employment, stable prices, and
moderate long-term interest rates)
What will result from the Fed increasing the federal rate?
~: Costs for banks will increase and loan rates for consumers and firms will increase. This leads
to slower growth.
Fiscal Policy
~: Controlled by the president and congress. It is the government budget.
GDP Deflator
~: uses nominal and real GDP to measure the price level (not in dollars)
Price level
~: The average price of all goods and services in an economy
How to calculate GDP deflator
~: (Nominal/Real)*100
CPI
~: used to correct nominal prices and wages over time for the impact of inflation using market
basket prices
How to calculate CPI
, Elscores 8/18/2024 6:16:34 PM
~: (market base price in current year/ market basket price in base year)*100
Limitations of GDP
~: 1. Doesn't account for change in quality.
2. Doesn't account for underground economy.
3. Doesn't account for 'bads' of economy
4. Doesn't account for non-market production
Limitations of CPI
~: Substitution bias, increase in quality bias, new product bias, outlet bias.
Core Inflation
~: ignores food/energy, as they can be more volatile
Headline inflation
~: takes food and energy in to account when calculating
Real prices
~: what would have been paid for the same good or service in the base year based on inflation
Real wages
~: wages based on the base year
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