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ECO202 (Miami University – Lee): Questions & Answers
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ECO202 (Miami University – Lee): Questions & Answers
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ECO202 (Miami University – Lee): Questions & AnswersEconomics Right Ans - the study of the choices people make to attain their
goals, given their scarce resources
Microeconomics Right Ans - the study of how households and firms make
choices, how they interact in markets, and how the government attempts to
influence their choices
macroeconomics Right Ans - the study of the economy as a whole
business cycle Right Ans - expansion and recession phases in an economy
inflation rate Right Ans - positive percentage change in prices
contributions of macroeconomic analysis Right Ans - -provides information
regarding current economic conditions
-aid the federal government in decisions regarding polices
GDP - Gross Domestic Product Right Ans - the market value of all final
goods and services produced in a country during a period of time, typically
one year / a measure used by economists to measure production / measured
in dollars / market value = price / includes only current production (no used
goods)
Final good Right Ans - a good that is purchased by its final user and is not
included in the production of any other good or service
Intermediate good Right Ans - a good that is an input into another good or
service
GDP w/ Value-Added Method Right Ans - the market value a firm adds to a
product
= price of product - value of intermediate goods
GDP measures Right Ans - measure of total expenditure / measure of total
income
, Components of GDP Right Ans - Consumption / Investment / Government
purchases / net exports
Consumption (GDP) Right Ans - spending by households on goods &
services, not including spending on new houses
Investment (GDP) Right Ans - spending by firms on new factories, office
buildings, machinery, and additions to inventories, plus spending by
households and firms on houses
Government Purchases (GDP) Right Ans - spending by federal, state, or
local governments on goods and services. Transfer payments (e.g. social
security payments are NOT included)
Net exports (GDP) Right Ans - Exports - Imports
Equation for GDP Right Ans - Y(GDP) = C(consumption) + I(investment) +
G(government purchases) + NX(net exports)
Shortcomings in GDP as a measure of total production Right Ans - Fails to
recognize household production & the underground economy / but if they
remain constant then it doesn't matter if they are excluded because we are
looking for a growth rate
Household production Right Ans - goods & services that people produce for
themselves (plant tomatoes, dishes, etc.)
Underground economy Right Ans - refers to buying & selling of goods &
services that are concealed from the government to avoid taxes or regulations
or because the goods & services are illegal
GDP/population Right Ans - GDP per person (capita) = average income
($40,000 currently)
Shortcomings of GDP as a measure of well-being Right Ans - leisure,
pollution, crime, equity (distribution of income)
GDP Equation Right Ans - quantity x price
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