Ecn 202 1st Edition Exam # 1 Study GuideChapter 1Gross Domestic Product (GDP)-the value of everything new produce in an economy at any given time-tells how much resources are available for each personCalculating GDPY=C+I+G+(X-IM) (Produce=consumer + investment + government + net export)3 Ways to Calculate GDP1) Final sales2) Add up value for each firm along with production process3) Add up all the income in economyCalculating Percent GrowthVariable x in time (t) and t-1, the growth of x between t and t-1 is:grx=100 X ((xt - xt-1)/(xt-1))-growth leads to lower unemployment-GDP increase -> population increaseIndividual Choice1) Resources are scarce2) Opportunity cost: cost of something is what you have to give up for it3) Marginal analysis: extra benefit and cost of 1+4) People make choices to make themselves betterInteraction PrinciplesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.1) Gains from trade2) Markets move towards equilibrium3) Efficiency should serve a goal4) Markets tend to be efficient 5) When markets are not efficient, governments action can improve social welfare Chapter 2Production Possibility Frontier (PPF)-a good economy-outside PPF=not feasible -inside PPF=feasible but not effective-along PPF=efficientPositive vs Normative StatementsPositive- how does the economy work-not worried about right or wrongNormative- how should the economy work-making moral decisionsChapter 3Demand Curve-slopes downward-quantity demanded goes up as price goes downShifting Demand Curve-change: price of good or service, exogenous variable, substitute, complement, income, taste, expectations, # of buyersShifting Supply Curve-change: input prices, prices of goods or services, technology, expectations, # of suppliersChapter 4Price CeilingP(c)<p(f)Price Ceiling Consequences -quantity demanded increased, quantity supplied decreased-inefficiently low quantity-inefficient low quality-inefficient allocation-wasted resources-black marketPrice Floor Consequences-quantity demanded increased, quantity supplied decreased-inefficiently low quantity-inefficient high quality-inefficient allocation-wasted resources-black marketChapter 6Two PoliciesMonetary Policy-controlled by Federal Reserve-affects short term interest ratesFiscal Policy-controlled by Congress and President-affects government spending and taxesBusiness Cycles: ups and downs in macro economyBusiness Cycle Peaks: end of expansion, recession startsBusiness Cycle Trough: end of recession, expansion startsChapter 7Financial Markets: match borrowers and saversStock: own a piece of company-voting rights-dividendsNominal: using current year pricesReal: using fixed