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ECON 162: Midterm 2
international arbitrage |
convert and talk about which currencies appreciate and depreciate. |
purchasing power parity theory |
currencies have the same purchasing power in their countries
|
GDP vs. GNP |
GDP refers to goods/services produced within a country
GNP refers to goods/services produced around world in factories or offices owned by the country |
what happens to the price of a product as people profit from international arbitrage |
They will converge until the only price differentialreflects the price of shipping costs of $x. |
what happens when the value of the dollar falls |
imports become more expensive to US consumers, soimports will decline. foreigner's export spending will increase, leading to a surplus in the capital/financial account (and a deficit in the current account). |
calculate GDP |
C + I + G + (x-m) |
calculate GNP |
GDP + NFIA |
NI using the income approach |
W + i + P + profits |
calculate statistical discrepancy |
SD = NNP - NI |
calculate nominal GDP in year 1 |
Q1 x P1 |
calculate nominal GDP in year 2
|
Q2 x P2 |
calculate percent change in nominal GDP |
nom GDP Y2 - nom GDP Y2 / nom GDP Y1
|
finding real GDP part 1 |
real GDP in year 1 = nominal GDP in year 1
real GDP in year 2 = nominal GDP in year 2 |
finding real GDP part 2 |
Real GDP in Year 2 is foundby valuing Year 2’s output at Year 1 prices. Real GDP in Year 1 is foundby valuing Year 1’s output at Year 2 prices |
costs of anticipated inflation |
1) menu costs
2) shoe leather costs
3) increased uncertainty about revenues and costs |
calculate NNP |
GNP - CCA |