VCU ECON 203 - Exam 3 Study Guide (4 pages)

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Exam 3 Study Guide



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Exam 3 Study Guide

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An overview of GDP, interest rate, present valuation, money supply, aggregate demand and supply


Pages:
4
Type:
Study Guide
School:
Virginia Commonwealth University
Course:
Econ 203 - Introduction to Economics
Edition:
1

Unformatted text preview:

Econ 203 1nd Edition Exam 3 Study Guide Lectures 25 26 28 37 Lecture 25 October 24 Introduction to Gross Domestic Product GDP nominal GDP is the dollar value of new domestically produced market transacted goods and services purchased during a given year Dollar value states that the good must be sold in a market Newly produced means that the good cannot be a used product that is being re sold Domestically produced goods are LEGALLY produced within national borders Final goods are those that are the final transaction to the consumer that will use the product GDP is calculated as the sum of price times quantity GDP P1 Q1 P2 Q2 Pn Qn P2012 Q2012 P2013 Q2013 G1 10 50 12 50 G2 5 100 8 100 G3 2 600 2 500 GDP2012 10 50 5 100 2 600 2200 GDP2013 12 50 8 100 2 500 2400 Differences in GDP from year to year can be the result of price changes output changes or both The problem with nominal GDP is that it doesn t specific what changes Lecture 26 October 27 GDP continued Nominal GDP real GDP price level Q P Real GDP new domestically produced final market transacted goods and services purchased in a particular year that is measured using standardized prices from previous years It tries to adjust for price change inflation or deflation Comparing real GDPs from years tells us whether a society is doing better worse or the same With 2012 as the base year Real GDP2012 nominal GDP2012 2200 Real GDP2013 12 50 8 100 2 600 2600 Price level P nominal GDP real GDP P2012 2200 2200 1 P2013 2400 2600 0 923 P2013 P2012 0 923 1 0 07 On average prices have fallen by 7 from 2012 to 2013 Lecture 28 November 3 Price Level Evaluation Pc current price Pb base price Pc Pb positive implies inflation a dollar has decreased purchasing power which is considered a tax on holding money negative implies deflation a dollar has increased purchasing power which is considered a reward for holding money society prefers inflation over deflation Consumer patience is bad Lecture 29 November 5 Aggregate Demand and



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