Macroeconomics Chapter 2 Study Guide

Question 34 Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the questions that follow: Assume that the base year is 2012. What was the growth rate of real GDP between the two years?

c) In a recession, the Bank of Canada will conduct an open market purchase to lower the interest rate. The quantity of investment will increase, and other interest-sensitive expenditure items will also increase. With an increase in aggregate expenditure, the multiplier increases aggregate demand, bringing real GDP to equal potential GDP, and a recession will be eliminated.

the market value of all goods and services produced within a country in a given period of time.

3. Explain how to calculate the balance of trade. How does the growing United States trade deficit impact the economy? Why?

1. The financial choices we make impact our economy. Think of a recent item you purchased. What factors influenced your decision in making this purchase? Did this purchase impact your local economy? Explain why or why not.

In view of the weak economy of the last several years, explain which of the four components of GDP had, or is having, the greatest positive impact in our economy. Use your results from the second e-Activity to support your response.

Deciding to start a business is brave and adventurous. The first step to success is a brilliant, viable, profitable idea. Whether you have decided to do it on your own because you are tired of working for someone else, or you are laid off after many years in your organization, before you decide to invest your life savings and get buried in debt, consider the big picture, the current economy, your demographic target consumer and do your research. The idea of solar energy is one such brilliant, viable idea. True the demand is present for such energy, but before taking the leap, consider the market saturation, competition, governmental rules and regulations and other determent factor that will influence the success of your

11. Draw the consumption possibilities curve for each country on the same graph you drew for question 9.

Using the data and your own economic knowledge, assess the case for financing universities mainly through charging fees to their students.

Gross Domestic Product, also known as GDP, is defined as the dollar value of all final goods and service produced within the border of a country during a specific period of time, typically in one year. GDP measures the value for the whole country, and it also changes quickly. We can take a look at the trends of US GDP in the website of the U.S. Bureau of Economic Analysis.

2. Based on the table, what calculations must you make to determine GNP from GDP?

In 2-3 paragraphs explain GDP: what items are included & excluded and why intermediate goods and services are usually not included directly in GDP.

Label these points B. (Look at the case of US and Japan’s export and import). (Each country will export what it specializes and import what it does not specialize)

The definition of GDP is composed of four parts. Firstly, we have to take into consideration the market value of the products. Froyen (2009) states that in order to gain the market value of the product we have to times the number of products produced the market by the prices they are traded at for e. g. Each unit of

| Critics of spending hikes argue that tax cuts can expand both aggregate demand and aggregate supply and that hasty increases in government spending may lead to wasteful public projects.Tax cuts increase aggregate demand by increasing household’s disposable income, as