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ECON 104 FINAL – GOFFE EXAM
UPDATED ACTUAL EXAM WITH
CORRECT SOLUTIONS.
Nominal GDP - correct answer- the value of final goods and services evaluated at current-year prices
How to calculate nominal GDP - correct answer- C + I + G +NX
Real GDP - correct answer- The value of final goods and services evaluated at base-year prices
How to calculate real GDP - correct answer- 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)
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Monetary Policy - correct answer- 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? - correct answer- Costs for banks will increase and loan rates for consumers and firms will increase. This leads to slower growth.
Fiscal Policy - correct answer- Controlled by the president and congress. It is the government budget.
GDP Deflator - correct answer- uses nominal and real GDP to measure the price level (not in dollars)
Price level - correct answer- The average price of all goods and services in an economy
How to calculate GDP deflator - correct answer- (Nominal/Real)*100
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CPI - correct answer- used to correct nominal prices and wages over time for the impact of inflation using market basket prices
How to calculate CPI - correct answer- (market base price in current year/ market basket price in base year)*100
Limitations of GDP - correct answer- 1. Doesn't account for change in quality.
- Doesn't account for underground economy.
- Doesn't account for 'bads' of economy
- Doesn't account for non-market production
Limitations of CPI - correct answer- Substitution bias, increase in quality bias, new product bias, outlet bias.
Core Inflation - correct answer- ignores food/energy, as they can be more volatile
Headline inflation - correct answer- takes food and energy in to account when calculating
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