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Principles Of Macroeconomics (ECON 101) Cheat sheet Midterm

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Sandra Watson
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University of the Fraser Valley

Principles of Macroeconomics (ECON 101)

Cheat sheet for macroeconomics midterm

production and total employment are decreasing.
Economic growth The ability of an economy to produce
increasing quantities of goods and services.
Inflation rate The percentage increase in the price level
from one year to the next.
Gross Domestic Product (GDP) measures
total income of everyone in the economy.
GDP also measures total expenditure on the economy’s
output of goods & Services (G & S)
-GDP is …the market value of all final goods & services
produced within a country in a given period of time.
Consumption © is total spending by households on goods
& services.
Investment (I) is total spending on goods that will be used
in the future to produce more goods.
Government Purchases (G) is all spending on the g&s
purchased by govt at the federal, state, and local levels.
Net Exports NX = exports – imports
Nominal GDP values output using current prices. It is not
corrected for inflation. Evaluated at current year process
Real GDP values output using the prices of a base year. —
Real GDP is corrected for inflation. Evaluated at base year
prices
Real GDP per capita is the main indicator of the average
person’s standard of living.
CHAPTER 5 IMPORTANT NOTES:
Price level: A measure of the average prices of goods and
services in the economy.
Inflation rate: The percentage increase in the price level
from one year to the next.
CPI Measures the typical consumer’s cost of living.
Producer price index (PPI) An average of the prices
received by producers of goods and services at all stages of
the production process.
The PPI includes the prices of intermediate goods (such as
flour, cotton, yarn, steel, and lumber) and raw materials
(such as coal and crude oil). Changes in the PPI cab give an
early warning of future movements in the CPI.
Nominal interest rate The stated interest rate on a loan.
Real interest rate The nominal interest rate minus the
inflation rate.

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Principles Of Macroeconomics (ECON 101) Cheat sheet Midterm

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