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CPA Exam - BEC - Economics (1)
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CPA Exam - BEC - Economics (1)
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CPA Exam - BEC - EconomicsNominal GDP - ANS-value of all final goods and services in current prices (NOT adjusted for
inflation)
Real GDP (definition) - ANS-value of all final goods and services in constant prices, adjusted for
changes in the price level (inflation).
Real GDP (formula) - ANS-
Multiplier Effect (definition) - ANS-when an increase in spending generates a multiplied increase
in the level of economic activity
Multiplier Effect (formula) - ANS-* where MPC represents the marginal propensity to consume
Gross Domestic Product (GDP) - ANS-Measure of the output and performance of a nation's
economy. Includes all final goods and services produced by resources within a country,
regardless of what country owns the resources. (emphasis on "domestic")
GDP - Expenditure Approach - ANS-GICE
-Government purchases
-[gross domestic] Investment (bs. spending)
-Consumption/Consumer spending
-net Exports (exp - imp)
GDP - Income Approach - ANS-I PIRATED
-Income of proprietors
-Profits of corporations
-Interest (net)
-Rental income
-Adjustments for net foreign income & misc. items
-Taxes
-Employee compensation
-Depreciation
Gross National Product (GNP) - ANS-measure of the market value of all final goods and
services produced by residents of a country, regardless of whether or not the resident produces
the goods or services domestically or abroad. (emphasis on "national")
Net National Product (NNP) - ANS-= GNP - Depreciation
, National Income (NI) - ANS-= NNP - Indirect business taxes
Personal Income (PI) - ANS-Income received by households and noncorporate businesses
Disposable Income (DI) - ANS-= PI - Personal taxes
Unemployment Rate (formula) - ANS-* labor force = all over 16 y/o who are working or actively
seeking employment
Frictional Unemployment - ANS-Normal unemployment due to turnover, switching jobs, etc.
Always exists.
Structural Unemployment - ANS-The jobs available do not match the skills available.
Always exists.
Seasonal Unemployment - ANS-Results from seasonal change in labor demand.
Always exists.
Cyclical Unemployment - ANS-Results from a decline in real GDP during contraction or
recession.
Natural Rate of Unemployment - ANS-= Frictional + Structural + Seasonal Unemployment
The Phillips Curve - ANS-Demonstrates the inverse relationship between the rate of inflation
and unemployment.
(Changes in aggregate demand)
Consumer Price Index (CPI) - definition - ANS-Measures the overall cost of a basket of goods
and services purchased by an average household during a given period of time.
Consumer Price Index (CPI) - formula - ANS-
Inflation Rate - formula - ANS-
Demand-Pull Inflation - ANS-caused by increases in aggregate demand (i.e. due to an increase
in wealth)
Cost-Push Inflation - ANS-caused by reductions in short-run aggregate supply (i.e. due to a rise
in oil prices)
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