23340569
Description
Flashcards by Sophia Lynch, updated more than 1 year ago
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Created by Sophia Lynch
almost 4 years ago
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| Question | Answer |
| What are the components of GDP? | 1. Consumption (C) 2. Investment (I) 3. Government Purchases (G) 4. Net Exports (NX) Y = C + I + G + NX |
| What is the difference between Fiscal and Monetary Policy? | Fiscal = The use of GOVERNMENT money to stabilise the economy over the business cycle. Monetary = The process in with the MONETARY AUTHORITIES control the supply of money, often targeting inflation/interest rate to stabilise the economy. |
| What is Nominal GDP? | It uses current PRICES to value the economy's production of goods and services in that year. Changes in Nominal GDP reflects both changes in the QUANTITY of goods and services and their PRICE. |
| What is Real GDP? | Uses constant (base-year) prices to place a value on the production of goods and services. Changes in Real GDP reflect ONLY changes in the QUANTITY of goods and services. |
| What is the difference between Nominal and Real GDP? | Nominal measures the change in price and quantity but real purely measures the change in quantity. Nominal measures price. Real measures size, hence removes the IMPACT OF INFLATION |
| What is the formula for Nominal GDP? | (Changing Price x Changing Quantity) |
| What is the formula for Real GDP? | (Initial Price x Changing Quantity) |
| How do you calculate Real GDP % Change? | Year 2 - Year 1 ------------------------------------- x 100 Year 1 |
| What is not included in Real GDP? (4) | 1. Leisure time 2. Non-market activities (homemade goods) 2. Environmental quality 4. The distribution of income |
| Why is GDP per Capita used when it has flaws? (2) | 1. GDP is highly correlated with things we are interested in e.g. life expectancy, adult literacy rate etc... 2. It is a cardinal measure, not just an ordinal measure. (An actual number provided, not just the ranking) |
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