Podcast
Questions and Answers
What does Gross Domestic Product (GDP) measure?
What does Gross Domestic Product (GDP) measure?
Which of the following is NOT included in the GDP calculation?
Which of the following is NOT included in the GDP calculation?
What is an example of structural unemployment?
What is an example of structural unemployment?
What does the Consumer Price Index (CPI) not consider?
What does the Consumer Price Index (CPI) not consider?
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How is the unemployment rate defined?
How is the unemployment rate defined?
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What characterizes an inflationary gap?
What characterizes an inflationary gap?
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In which scenario would actual inflation be less than expected?
In which scenario would actual inflation be less than expected?
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Which of the following statements about the Circular-Flow Diagram is correct?
Which of the following statements about the Circular-Flow Diagram is correct?
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Which of the following best describes cyclical unemployment?
Which of the following best describes cyclical unemployment?
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What does the Labor Force Participation Rate measure?
What does the Labor Force Participation Rate measure?
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Study Notes
Gross Domestic Product (GDP)
- GDP measures the market value of all final goods and services produced within a country in a given period.
- GDP does not include tax and stock.
Factors of GDP
- Consumption
- Investment
- Government Purchases
- Net Exports (Exports - Imports)
Consumer Price Index (CPI)
- CPI measures the overall level of prices
- Formula: CPI = (Current basket / Base year basket) x 100
- Percentage change in CPI represents inflation.
CPI Weaknesses
- Substitution bias (some prices rise faster than others)
- Consumers buying more cheaper products
Cost of Living
- CPI often overstates the rise in the cost of living due to substitution bias
Unemployment
- Unemployed: Not working, actively looking for work
- Labor Force: Employed + Unemployed
- Unemployment Rate: (Number of Unemployed / Labor Force) x 100
- Labor Force Participation Rate: (Labor Force / Population) x 100
Types of Unemployment
- Structural: Skills no longer needed by the market; requires retraining
- Frictional: Workers between jobs; temporary
- Cyclical: Related to economic downturns
Circular Flow Diagram
- Shows the flow of money and goods/services between firms and households
- Includes consumption, production, factor markets and leakages.
Inflationary vs Contractionary Gaps
- Inflationary Gap: Real GDP > Potential GDP
- Contractionary Gap: Real GDP < Potential GDP
Stagflation
- Combination of high inflation and slow economic growth
- Often caused by supply shocks (negative shocks to the supply of goods) or poor economic policy.
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Description
This quiz covers key economic concepts such as Gross Domestic Product (GDP), Consumer Price Index (CPI), and types of unemployment. Test your understanding of how these economic indicators measure the health of an economy and their implications on cost of living and employment rates.
