Exam 1 review
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This document provides a summary of chapters 23-26 from an exam review on macroeconomics. It defines key economic concepts like GDP, inflation, consumer price index, productivity, and the financial system. GDP is defined as the total market value of final goods and services produced within a country. Inflation rates measure changes in GDP deflator and CPI. The CPI tracks price changes in consumer goods. Productivity is defined as output per input. The financial system matches savers with borrowers through financial markets and intermediaries like banks and mutual funds.
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Exam 1 review
- 1. Exam 1 Review Macroeconomics Chapter 23-26 College of Business AlfaisalUNIVERSITY
- 2. Chapter 23 Measuring a Nation’s Income College of Business AlfaisalUNIVERSITY
- 3. GDP Gross Domestic Product The market value of all final goods and services produced in a country in a given time
- 4. GDP = C + I + G + (X - M) C = Consumption I = Investment G = Government X = Exports M = Imports
- 5. What is GDP? C = 105 I = 40 G = 25 X = 30 M = 20
- 6. GDP Per Capita GDP Per Person Average GDP
- 7. Percentage Change new number - old number old number
- 8. GDP Deflator What something would sell for
- 11. Real will always have a base year
- 13. GDP Deflator Nominal GDP Real GDP= x 100
- 14. GDP Inflation Rate GDP DelflatorYear 2 - GDP DelflatorYear 1 GDP DelflatorYear 1= x 100
- 15. Chapter 24 Measuring the Cost of Living College of Business AlfaisalUNIVERSITY
- 17. CPI Consumer Price Index The market value of a typical basket of goods.
- 18. Measure CPI - Five Steps 1. Select items for Basket 2. Find Prices 3.Total Cost 4. Pick BaseYear and compute Index 5. Compute Inflation Rate
- 19. CPI Total Cost thisYear Total Cost in base year x 100
- 20. CPI Inflation Rate CPIYear 2 - CPIYear 1 CPIYear 1 = x 100
- 21. Converting to Today Price level today Price level in prior year Amount in prior year X
- 22. Year General Index Food and non - alcoholic beverages Tobacco Clothing and Footwear Housing , Water, Electricity, Gas, and other fuels Furnishing s, household equipment & Routine Health Transport Communic ation Recreation and Culture Education Restaurant s and Hotels Miscellane ous goods and services 1988 86.9 71.3 67.0 140.6 72.4 107.9 92.2 111.0 74.0 117.0 85.0 87.3 89.8 1989 87.9 72.5 67.2 136.6 70.8 106.6 94.8 112.5 129.5 115.9 87.0 87.0 88.5 1990 87.0 74.5 67.8 136.7 71.0 106.9 95.4 98.1 151.4 114.4 86.0 87.9 85.1 1991 90.3 79.7 74.2 135.4 74.3 108.4 95.3 101.9 151.4 117.6 86.5 91.0 86.3 1992 89.5 82.0 78.6 134.8 75.3 109.5 97.1 96.4 104.1 120.3 87.6 91.6 85.7 1993 90.6 83.0 79.0 133.7 79.5 109.9 97.1 95.9 88.4 118.5 88.8 92.7 86.8 1994 91.8 81.8 78.9 131.9 84.6 108.8 96.5 97.2 88.4 117.1 89.8 92.4 87.8 1995 96.6 81.6 79.0 130.4 90.5 108.6 96.8 111.7 143.0 115.0 92.2 93.4 88.3 1996 96.8 83.9 79.0 126.5 90.5 108.1 96.0 110.7 143.0 114.7 93.6 93.6 87.8 1997 96.5 84.9 85.7 124.8 90.5 106.3 96.5 108.5 143.0 113.6 94.8 93.1 84.8 1998 96.2 84.8 95.9 123.2 90.0 107.0 97.4 107.6 142.1 113.1 95.7 93.5 82.1 1999 94.2 82.6 96.2 117.2 89.8 106.3 97.7 102.3 136.6 110.4 96.2 94.0 81.2 2000 93.2 81.2 94.4 111.5 89.8 103.8 98.9 102.5 136.9 106.6 98.1 93.7 81.1 2001 92.0 80.5 90.9 109.0 89.8 102.2 98.4 98.4 132.7 106.1 98.6 92.8 80.2 2002 92.1 80.6 97.0 108.2 89.8 101.0 98.5 99.6 128.3 105.3 99.2 93.8 81.3 2003 92.6 82.9 98.0 107.7 89.8 100.0 98.7 99.4 122.9 103.2 99.5 94.3 83.1 2004 92.9 85.4 98.4 105.6 90.0 97.6 98.9 99.2 120.2 99.8 100.8 93.9 84.1 2005 93.4 88.2 97.5 103.8 89.7 98.7 98.7 100.1 104.2 98.8 102.1 94.2 85.8 2006 95.2 93.8 97.7 103.6 90.7 98.4 100.0 97.0 100.6 97.9 103.1 96.5 91.9 2007 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2008 106.1 113.7 105.1 101.0 108.5 103.2 103.2 97.0 98.1 97.7 110.3 103.2 101.6 2009 110.5 116.4 107.3 101.6 120.1 105.6 103.2 98.2 98.2 99.2 111.8 110.0 104.9 2010 114.7 120.8 119.2 101.1 129.2 107.0 103.3 99.7 97.7 97.2 113.2 113.8 110.1 2011 119.0 127.1 126.7 99.7 143.9 115.5 103.4 103.1 92.0 104.7 108.7 117.0 113.9 2012 122.4 132.9 141.3 103.3 148.7 117.5 105.6 108.3 92.1 104.5 110.2 121.7 117.8 2013 126.7 140.5 153.1 104.8 153.8 122.6 109.0 111.0 93.8 106.3 112.6 126.8 117.6
- 23. Problems with CPI 1. Substitution 2. New goods 3. Changes in Quality
- 25. What people want What is Wealth?
- 28. Intellectual Financial Physical Human Culture Entrepreneur trust knowledge skills personality health relationships natural resources time buildings equipment things than make things money and risk savers and borrowers time is money (1+r)n insurance limited liability corporations ideas technology methods
- 29. Rule of 70s Years to Double 70 Rate of Growth 70 divided by the rate of growth
- 30. Anything that helps you create wealth What is Capital?
- 34. If you want more wealth you more need productivity productivity requires innovation innovation requires inventions inventions require ideas ideas require people
- 35. Chapter 26 Saving, Investment and the Financial System College of Business AlfaisalUNIVERSITY
- 36. Financial System Institutions that match people who save money with people who need money
- 40. Bond Markets What is a Bond? Debt Certificate of Indebtedness
- 41. Bond Term - Length of time Credit Risk - chance of default Tax - How is the interest or profit taxed
- 42. Stock Ownership Share Company sells once Then resold to other buyers Limited Liability No promises of profit Equity position
- 44. Can a company declare a dividend if they have no profit? Yes, from previous retained earnings
- 47. Share Price Every time a share sells it sets the current price Share prices go up and down
- 48. Dividend Company Earnings or Profits Declare dividend Keep - Retained Earnings
- 49. Dividend Earnings: 500 Dividend: 300 Retained Earnings: ?
- 50. Price - Earnings Ratio P/E Ratio Current Share Price divided by Earnings last year
- 51. P/E Ratio Current Share Price: 75 Earnings last year: 5 P/E Ratio: ?
- 54. Banks Savers Borrowe rs Bank Pays 5% Bank Charges 7% Make money on spread 7% - 5% = 2%
- 55. We are rich today because people yesterday were willing to save and not consume
- 56. Mutual Funds Allows small investors to pool and diversify their savings
- 57. 460 792 40 small savers 323 small savers 323 small savers 323 small savers 323 Mutual FundTotal:1292
- 58. Index Fund Buy one share of all the companies in the market Tadawul All Share Index (TASI)
- 59. Exchange Indexes Dow Jones Industrial Average (DJIA) 30 biggest U.S. Companies S&P 500 500 biggest U.S. companies Tadawul All Share Index (TASI)
- 60. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0 100 200 300 400 500 600 700 800 900 1000 Interest Profit Rate % Loanable Funds Supply Demand Market for Loanable Funds
- 61. Intellectual Financial Physical Human Culture Entrepreneur trust knowledge skills personality health relationships natural resources time buildings equipment things than make things money and risk savers and borrowers time is money (1+r)n insurance limited liability corporations ideas technology methods