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UGBA 101b EXAM 1 REVIEW 2023/2024 updated to pass graded A+
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UGBA 101b EXAM 1 REVIEWEndogenous variables - correct answer variables that a model tries to explain Exogenous variables - correct answer autonomous factors that come from outside a theoretical model or system and that cannot be explained by the system GDP - correct answer Y = C + I + G + NX ...

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  • November 14, 2023
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  • 2023/2024
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UGBA 101b EXAM 1 REVIEW

Endogenous variables - correct answer variables that a model tries to explain



Exogenous variables - correct answer autonomous factors that come from outside a theoretical model or
system and that cannot be explained by the system



GDP - correct answer Y = C + I + G + NX



G includes - correct answer spending on goods and services: for example - purchases of
trains/installation of subway rail.



G excludes - correct answer transfer payments (unemployment) bc they do not represent spending on
goods/services. Transfer payments are also excluded from GDP, though such payments may fund
consumption and indirectly contribute to GDP.



GDP deflator - correct answer a measure of the price level calculated as: 100 x (nominal GDP/real GDP)



Consumer Price Index (CPI) - correct answer a measure of the overall cost of the goods and services
bought by a typical consumer



Issues with CPI - correct answer CPI generally overstates inflation. CPI uses fixed weights, so it cannot
reflect consumers' ability to substitute toward goods whose relative prices have fallen.



CPI vs GDP Deflator - correct answer CPI is fixed, GDP deflator changes every year.



PCE deflator - correct answer The ratio of nominal to real consumer spending. Includes imported goods.



Core inflation - correct answer CPI minus food and energy costs

, Closed economy - correct answer does not trade with other countries



Production function - correct answer shows how much output (Y) the economy can produce from K units
of capital and L units of labor

Y = F(K,L)



GDP - correct answer output is determined by fixed factor supplies and fixed state of technology



MPL= - correct answer change in output(Q)/ change in labor (L)



MPK (marginal product of capital) - correct answer change in Q/change in K



Total capital income - correct answer MPK x K



Disposable income - correct answer Total income - taxes



Investment function - correct answer I = I(r)

where r denotes the real interest rate, (as I increases, r decreases)



Supply of Loanable funds - correct answer comes from saving



Private saving = - correct answer (Y-T) - C



Public Saving = - correct answer T - G



National Saving, S = - correct answer Y-C-G



if T > G - correct answer budget surplus

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