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Macro Economics Test 2:
1. 3 Major goals of an economy 1. High and Sustained (Long-Run) Eco. Growth
2. Low unemployment Rate
3. Low Inflation Rate
2. Difference between Micro & Macro Economic: Micro: study of individuals, single firm and single industry
Macro: Economy as a whole
3. What is GDP? Gross (Total) Domestic Product
Geography Matters
Final value of Goods & Services produce in an economy in a period
of time
4. What is GNP? Gross National Product
Nationality Matters
Final value of Goods & Services produce by the citizens of
the country
5. What GDP omits? 1. Intermediate Goods
2. Certain domestic items
3. Both legal & illegal underground transactions
Ex: Legal: Paid cash for Gold w/o tax
Illegal: drug
4. Transfer payments:
Ex: Welfare, SSI, unemployment checks
5. Re-sale items
6. Leisure time
7. 3 Methods to compute GDP are: 1) Expenditure Method (Expenditure approach)
2) Income Method (Income approach)
3) Value-Added Method
8. What are the 4 Sectors of an economy? 1) Household sector
2) Firms/Business sector
3) Government sector
4) Foreign Sector
9. Expenditure Method is: Adding all the expenditures done by the 4 sectors
Sectors Expenditure
Households Consumption (C)
Firms Investment (I)
Government Gov. Purchases (G)
Foreign Net Export (X – M)
Formula: C+ I + G + X -M
10. 3 Major Consumptions Durable goods = cars, computer (last > 1 Yr)
Non-Durable goods = Foods, clothes (last < 1Yr)
Services = Doctors, Lawyers
11. # of countries in the world = 196
12. # of Well-Developed countries = 30
13. Amount of worldwide Product ion = 107.5 Trillions
14. Amount of US production= 17.14Trillions
15. 2014 US per Capita GDP = $54,000
16. What is Nominal GDP? Current Dollars Amount
Formula: Current Year Quantity x Current Year Price = GDP
17. What is Real GDP? Adjust to Inflation Rate
Formula: Current Year Quantity x Base Year Price = GDP
