question
Gross Domestic Product (GDP)
answer
The market value of all final goods and services produced within a country in a given period of time.
question
What does GDP measure?
answer
Total income of everyone in the economy, total expenditure on the economy's output of goods and services and the value of output.
question
What might a higher GDP indicate?
answer
More goods and service being produced, meaning more people being employed.
question
Y=GDP=C+I+G+NX
answer
C: Consumption
I: Investment
G: Government Spending
NX: Net Exports (Exports-Imports)
I: Investment
G: Government Spending
NX: Net Exports (Exports-Imports)
question
Formula to Calculate Nominal GDP
answer
(P1XQ1) + (P2XQ2)...
question
Formula to Calculate Real GDP
answer
(P1Y1XQ1) +(P2Y1XQ2)...
OR
Nominal GDP/GDP Deflator
OR
Nominal GDP/GDP Deflator
question
GDP Deflator Formula
answer
Nominal GDP for a given year/Real GDP for a given year
question
Inflation Rate Formula
answer
[(Deflater rate for latter year-Deflator rate for earlier year)/Deflator rate for earlier year] X 100
question
Consumer Price Index (CPI)
answer
Price of a typical bundle of goods
question
Formula for the CPI per year
answer
(P1XQ1)+(P2XQ2)
question
Formula for CPI per year using base year
answer
[(P?XQ?)/(PBXQB)]X100
question
What are the problems with the measurement of CPI?
answer
Substitution bias: CPI does not account for substitutions that occur when prices go up and thus overstates the true cost of living.
question
If real GDP doubles and the GDP deflator doubles, what will happen to nominal GDP?
answer
It will quadruple
question
What is the difference between the GDP deflator and CPI?
answer
GDP deflator includes all goods produced in Canada and does not include imported goods. CPI does not include all goods produced in Canada but includes imported goods.
question
Andrew is offered jobs:
CPI in Calgary = 120
CPI in Toronto = 150
Andrew would earn $65,000 in Calgary
What would he have to earn in Toronto to be equally as well-off?
CPI in Calgary = 120
CPI in Toronto = 150
Andrew would earn $65,000 in Calgary
What would he have to earn in Toronto to be equally as well-off?
answer
$65,000 X (150/120) = $81,250
question
What is the Fisher Equation?
answer
Nominal Interest Rate = Real Interest Rate + Inflation Rate
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