ECON 202 (ECON202)

QUESTIONS AND ANSWERS

QUESTIONS AND ANSWERS

What is economic growth rate? CORRECT ANSWER It is the annual % change in real GDP What are living standards measured by? CORRECT ANSWER Real GDP per capita Living Standards amongst countries CORRECT ANSWER Living standards vary greatly between different countries. The rankings change over time because economies grow at different rates. Labor Productivity CORRECT ANSWER Labor productivity is what a country's standard of living is determined by. Increase is living standards is the result...

Define Saving CORRECT ANSWER Saving is when someone spends less than they earn and use the rest to buy stocks, bonds, or to put in a bank account. Define Investment CORRECT ANSWER Investment refers to the purchase of new capital such as equipment or buildings. What is the Financial System? CORRECT ANSWER The financial system is what links the savers(lenders) and the investors(borrowers). The savers and or lenders are the people who have an excess amount of funds with no use for the funds, ...

CPI Definition CORRECT ANSWER The average level of prices of goods typically bought by households. Inflation Rate Definition CORRECT ANSWER The percentage increase in the general price level. CPI Formula CORRECT ANSWER Cost of basket year 1/Cost of basket base year X 100 Inflation Rate Formula CORRECT ANSWER (Year 2 CPI - Year 1 CPI)/Year 1 CPI X 100 Problems with using the CPI to track changes in cost of living CORRECT ANSWER 1. Substitution bias 2. Quality Bias 3. New Products Bi...

Multiplier effect CORRECT ANSWER The increase in consumer spending that occurs when spending by one person causes others to spend more too Disposable income CORRECT ANSWER Income left after paying taxes -consumption is based on the amount of disposable income -people usually consume part of their disposable income and save the rest MPC CORRECT ANSWER Marginal propensity to consume -the amount consumption increases when disposable income increases by $1 -the MPC is a number between 0 an...

What is left out of official GDP measures? CORRECT ANSWER 1) Goods and services not exchanged in the markets 2) Underground economy - Cash, Not reported, Not Taxes (Legal and Illegal) 3) Environment (pollution affects the quality of life) 4) •Amount of leisure time affects the quality of life What causes an increase in nominal GDP? CORRECT ANSWER Growth in quantity and/or price GDP Deflator CORRECT ANSWER Measure of the overall change in prices in an economy using the ratio between ...

Who is not in the working age population? CORRECT ANSWER Young (less than 16 years old) Military Institutionalized population (prison, mental hospitals) Working age population (calculation) CORRECT ANSWER Labor Force + Not in the labor force Labor Force CORRECT ANSWER working-age people who are either employed or unemployed Labor Force (calculation) CORRECT ANSWER employed + unemployed Employed CORRECT ANSWER 1)Everyone who during the week of survey had worked at least 1 hour as ...

Production Possibility CORRECT ANSWER a countries production capabilities modeled by the PPF PPF (Production Possibilities Frontier) CORRECT ANSWER -Line or curve that shows all possible combos of 2 outputs Points on PPF CORRECT ANSWER -points outside line are unattainable -points within are attainable but inefficient -points on line are attainable and efficient Opportunity Cost CORRECT ANSWER tradeoff between producing more of a good, or less of a good Opportunity Cost Formula COR...