exam 1 review
TRANSCRIPT
ECO 202 Macroeconomics
Exam 1 Review
Percentage Change
new - old old= x 100
(add %)
new - old old=
new old=
old old
_–
=new old
1_–
Linear Cyclical Seasonal Volatile
Exponential !
Type of Functions
Linear - Line
Cyclical - Cycle
Seasonal - Cycle
Jan April July Oct
Volatile - Big Swings
0
500,000
1,000,000
Exponential
250,000
750,000
10
100
1
1,000
10,000
100,000
1,000,000
Log Convert Exponential to Linear
Make the scale
exponential
Chapter 23GDP
GDP Per Capita GDP Deflator
Chapter 23 Gross Domestic Product
abbreviation definition equation
GDP Gross Domestic Product
The market value of all final goods and services produced in a country in
a given time
Market ValueWhat something
would sell for
AllEverything except...
Stuff you don’t sell
FinalIntermediate
Final
Avoid double-counting
Final
Intermediate
Goods and Services
Goods
Services
ProducedNew Stuff
Does not include the sale of used
goods
Within a Country
In a given period of time
Year Y/Y Quarter Q/Q
Annualized: Q x 4
How do you calculate
GDP?Equation
GDP =C = Consumption I = Investment G = Government X = Exports M = Imports
GDP =C + I + G + (X - M)
ConsumptionSpending by
households on goods and services, except new housing
InvestmentSpending on capital
equipment, inventories, and structures, including new
housing
GovernmentSpending on goods and services from
local, state, and federal governments.
Net ExportsExports minus
imports
GDP Per Capita =
GDP Population
GDP Per Capita
best measure of relative economic
condition
GDP Deflatormeasure of changes
in the price level !
Base Year
GDP Deflatordeflates
price inflation
GDP Deflator
Nominal GDP Real GDP X 100
Inflation Rate
GDPD Year 2 - GDPD Year 1
GDPD Year 1 X 100 (add %)
GDP Inflation RateGDPD Year 2 - GDPD Year 1
GDPD Year 1 X 100
276 - 240
240 X 100
= 15%
Year 1 = 240
Year 2 = 276
36
240 X 100
Recession
Two consecutive quarters of negative
GDP growth
Chapter 24Consumer Price Index
CPI
CPIa measure of the overall
cost of goods and services bought by a
typical consumer
GDP Deflator vs. CPI
GDP is everything produced
CPI is just what consumers buy
Inflation and
GDP Deflator and CPI
Import inflation will affect CPI but on GDP Deflator
CPI Steps1. Fix the basket
2. Find the prices
3. Compute cost
4. Choose base year and compute index
5. Compute inflation rate
CPI
Price this year Price in the base year
X 100
CPI Inflation RateCPI Year 2 - CPI Year 1
CPI Year 1 X 100
143 - 130
130 X 100
= 10%
Year 1 = 130
Year 2 = 143
13
130 X 100
Problems with CPI
substitution bias new goods
quality changes
What increased more:
Salary or CPI?
Year CPI Salary1990 130 50,000
2014 225 100,000
% Change 73% 100%
Year CPI Salary1990 130 50,000
2014 225 75,000
% Change 73% 50%
What increased more:
Salary or CPI?
Year CPI Salary1990 130 50,000
2014 225 86,538
% Change 73% 73%
What increased more:
Salary or CPI?
If you loan some one 100 riyals for one year and the inflation rate is 13 percent, how many
riyals should you ask for in return?