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Appendix: Historical Data on Nominal and Real GDP The table below shows U.S. nominal GDP and U.S. Real GDP for the years from 1974 through 2013. Notice that nominal GDP increased by almost 11-fold over this forty year period. Real GDP increased by almost 3-fold. Information is from the Bureau of Economic Analysis. Year Nominal GDP Real GDP (2009 Base) 1974 1,549 billion 5,396 billion 1975 1,689 billion 5,385 billion 1976 1,878 billion 5,675 billion 1977 2,086 billion 5,937 billion 1978 2,357 billion 6,267 billion 1979 2,632 billion 6,466 billion 1980 2,863 billion 6,450 billion 1981 3,211 billion 6,618 billion 1982 3,345 billion 6,491 billion 1983 3,638 billion 6,792 billion 1984 4,041 billion 7,285 billion 1985 4,347 billion 7,594 billion 1986 4,590 billion 7,861 billion 1987 4,870 billion 8,133 billion 1988 5,253 billion 8,475 billion 1989 5,658 billion 8,786 billion 1990 5,980 billion 8,955 billion 1991 6,174 billion 8,948 billion 1992 6,539 billion 9,267 billion 1993 6,879 billion 9,521 billion 1994 7,309 billion 9,905 billion 1995 7,664 billion 10,175 billion 1996 8,100 billion 10,561 billion 1997 8,609 billion 11,035 billion 1998 9,089 billion 11,526 billion 1999 9,661 billion 12,066 billion 2000 10,285 billion 12,560 billion 2001 10,622 billion 12,682 billion 2002 10,978 billion 12,909 billion 2003 11,511 billion 13,271 billion 2004 12,275 billion 13,774 billion 2005 13,094 billion 14,234 billion 2006 13,856 billion 14,614 billion 2007 14,478 billion 14,874 billion 2008 14,719 billion 14,830 billion 2009 14,419 billion 14,419 billion 2010 14,964 billion 14,784 billion 2011 15,518 billion 15,021 billion 2012 16,163 billion 15,369 billion 2013 16,768 billion 15,710 billion Appendix: Circular Flow Diagram Total output produced in the economy can be measured by adding up the Total Expenditures on final goods and services, or by adding up the payments to the resource owners who provided the resources to produce the final goods and services. A simple circular flow diagram illustrates the flow of goods and services through product markets and the flow of resources through resource markets. FOR REVIEW ONLY - NOT FOR DISTRIBUTION Measuring Total Output: GDP 5 - 8
The simple circular flow diagram below illustrates the interactions between households and firms through product markets and resource markets. The outer flow on the diagram depicts the physical flow of resources and products. The inner flow on the diagram depicts the payments flow. Examining the physical flow first, households provide resources (labor, land, capital, and entrepreneurship) to firms through resource markets. The firms use the resources to produce goods and services, which they provide to the households through product markets. Moving in the opposite direction of the physical flow is the payments flow. Firms pay for the resources purchased through resource markets by making resource payments (wages, rent, interest, and profits). The resource payments are household income to the households. The households use their income to consume goods and services. The consumption spending is revenue for the firms. The firms use their revenue to purchase more resources. And the circular flow continues. Households Goods and Services Consumption Household Income Resources Study Guide for Chapter 5 Chapter Summary for Chapter 5 Product Markets Resource Markets Goods and Services Revenue Resource Payments Resources Firms Gross domestic product (GDP) is the market value of all final goods and services produced annually. GDP needs to be calculated as objectively and as consistently as possible. Thus, GDP is calculated with certain exclusions. Exclusions in calculating GDP include intermediate goods, nonproduction transactions, nonmarket production, underground production, leisure, and economic bads. FOR REVIEW ONLY - NOT FOR DISTRIBUTION 5 - 9 Measuring Total Output: GDP
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PRINCIPLES OF ECONOMICS JEFF HOLT S
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Principles of Economics, 6th Editio
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16. Study Guide for Chapter 7 17. C
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11. Appendix: Book Review - “The
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20. Appendix: The NCAA Cartel 21. S
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Introduction: A Brief History of U.
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In the twentieth century, per capit
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Appendix: The 35 Largest National E
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Multiple Choice: ___ 1. The Jamesto
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2. Describe the economic cost of th
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Chapter 1 Scarcity and Choices The
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Example 5B: At the end of 1982, the
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Example 11: When Cindy quits her jo
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consequences may result in failure
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An upward sloping curve (as in Exam
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In making decisions, humans tend to
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5. ______________________ _________
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___ 13. If the value of one variabl
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Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
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Chapter 2 Trade and Economic System
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Example 4B: The following quantitie
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1. An increase in the quantity of r
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Page 49 and 50: The two primary economic systems ar
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Page 55 and 56: Chapter 3 Demand, Supply, and Equil
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Page 63 and 64: $7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3
Page 65 and 66: Example 17: The graph below illustr
Page 67 and 68: Questions for Chapter 3 Fill-in-the
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Page 73 and 74: Chapter 4 Inflation and Unemploymen
Page 75 and 76: Computing the Rate of Inflation The
Page 77 and 78: Full Employment Though unemployment
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Page 81 and 82: During the Great Depression, the ec
Page 83 and 84: Appendix: Think Like an Economist -
Page 85 and 86: Answer questions 8. and 9. based on
Page 87 and 88: ___ 25. The extension of unemployme
Page 89 and 90: Chapter 5 Measuring Total Output: G
Page 91 and 92: 5. Leisure. Leisure time is by defi
Page 93 and 94: The U.S. is a high per capita GDP c
Page 95: Example 17: In “An International
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Page 103 and 104: Chapter 6 The Aggregate Market The
Page 105 and 106: Example 2C: Assume the same facts a
Page 107 and 108: Example 5B: The price of crude oil
Page 109 and 110: Price Level Real GDP SRAS AD 2 AD 1
Page 111 and 112: Appendix: Why the Aggregate Demand
Page 113 and 114: ___ 3. DEF Company can invest in ne
Page 115 and 116: 2. List and explain the two factors
Page 117 and 118: Chapter 7 Classical Economic Theory
Page 119 and 120: Notice that the investment demand c
Page 121 and 122: Long-Run Equilibrium If Real GDP is
Page 123 and 124: Example 6B: When the economy is in
Page 125 and 126: Laissez-faire If the economy is sel
Page 127 and 128: ___ 5. According to Say’s Law: a.
Page 129 and 130: 3. On the graph below, draw an aggr
Page 131 and 132: Chapter 8 Keynesian Economic Theory
Page 133 and 134: Example 2B: The graph below illustr
Page 135 and 136: Example 5: Assume that the table be
Page 137 and 138: Notice on the graph on the previous
Page 139 and 140: According to Keynesian theory, a ch
Page 141 and 142: “The General Theory” also inclu
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Page 145 and 146: 3. If the MPC is .667, and investme
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Chapter 9 Fiscal Policy The basic e
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Keynesian Fiscal Policy Theory and
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Example 5A: The federal government
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The Laffer Curve What will happen t
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Appendix: The Importance of Incenti
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___ 4. A decrease in government exp
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2. Explain what automatic stabilize
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Chapter 10 Money, Money Creation, a
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Example 4B: The castaways on Gillig
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Looking at the balance sheet below,
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Demand-side One-shot Inflation Exam
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4. Inflation increases uncertainty
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life; it came into existence not by
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calculated by using the potential d
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___ 12. If the required-reserve rat
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4. Referring to the balance sheet f
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Chapter 11 The Federal Reserve Syst
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5. After Bank X sells the $300,000
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Low Mortgage Interest Rates Mortgag
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Relaxed Standards for Mortgage Loan
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The Bursting of the Housing Bubble
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On February 17, 2009, the federal g
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Fed policies caused short-term inte
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___ 10. The Fed’s most important
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___ 25. In response to the recessio
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Chapter 12 Monetary Policy The basi
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2. A change in aggregate demand (AD
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Monetarist Transmission Mechanism C
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3. Borrowers do not have to seek ou
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Appendix: Book Review - “The Age
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Questions for Chapter 12 Fill-in-th
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___ 16. The primary source of incom
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7. According to Alan Greenspan, wha
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Chapter 13 Taxes, Deficits, and the
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Example 5: In 2015, Taxpayer A had
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of $5 and a quantity of 10 units. T
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The complexity of the tax law also
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the current government spending and
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cut of 1964. The top rate was lower
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___ 6. Federal excise taxes: a. are
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3. How would eliminating the loopho
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Chapter 14 Economic Growth The basi
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2. Labor. Labor can contribute to e
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estricting international trade (e.g
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An improvement in technology (e.g.
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The table below shows the economic
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will increase both Real GDP and per
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___ 8. Which of the following is co
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___ 26. The opinion that economic g
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Chapter 15 Less Developed Countries
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Example 8: Countries A, B, C, and D
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Obstacles to Economic Development f
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c. Restrictions on international tr
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Appendix: Book Review - “The Powe
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Example 25: In Brazil, about half t
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Study Guide for Chapter 15 Chapter
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___ 13. Among the counterproductive
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4. List four ways that governments
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Chapter 16 International Trade The
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Other Benefits of Free Internationa
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Example 6: The graph below illustra
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competitive disadvantage. But dumpi
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is only 25% as productive as before
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Smith was skeptical of government a
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___ 4. For Country X, what is the o
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___ 18. Frédéric Bastiat’s “P
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4. On the graph below: (1) What is
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Chapter 17 Elasticity We are often
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Example 4A: What is price elasticit
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Example 5A: Gertie’s Gas and Go i
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Example 10A: When the price of Good
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Example 13B: On the graph below, su
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$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
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In the long run, would the deadweig
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___ 7. The factors that determine w
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3. a. Which price (or prices) from
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Chapter 18 Utility The basic econom
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Nonetheless, society generally assu
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Example 9: Capital City operates a
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Marginal rate of substitution - the
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The diamond-water paradox is the ob
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Complete the table below to answer
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4. The graph below shows indifferen
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Chapter 19 The Firm The basic econo
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than contributing to team productio
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1. Difficulty in raising large amou
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Corporations also use self-financin
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Example 24: A blacksmith who produc
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For financing needs, proprietorship
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___ 13. Corporations: a. are comple
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5. List two things that the absence
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Chapter 20 Production and Costs The
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In Example 5B, Birdwell finds that
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variable cost initially decreases,
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Quantity TC MC AFC AVC ATC 0 240 X
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If the scale of operation is increa
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average total cost. Average fixed c
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___ 11. Concerning the cost curves:
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5. Complete the following cost tabl
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Chapter 21 Perfect Competition The
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Even though a perfect competitor ca
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Example 6C: This example builds on
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At what price will there be neither
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Appendix: Perfect Competition in th
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Multiple Choice: ___ 1. A perfect c
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___ 17. Perfect competition: a. req
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Answers for Chapter 21 Fill-in-the-
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Chapter 22 Monopoly Of the four mar
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3. Exclusive ownership of an essent
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maximizing quantity (4 units) creat
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$22 - 20 - 18 - 16 - 14 - Deadweigh
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2. Negotiating, beginning at a high
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Legal barriers are created by gover
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___ 8. The slope of the demand curv
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Price Quantity 3. List some of the
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Chapter 23 Monopolistic Competition
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For Percomp (the perfect competitor
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Example 7A: The graph below represe
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Example 9: The Organization of the
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Example 12 illustrates the dilemma
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its current price and quantity. The
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___ 14. Game theory: a. is a method
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Answers for Chapter 23 Fill-in-the-
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Chapter 24 Factor Markets The basic
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$ $240 - 200 - 160 - 120 - 80 - 40
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Since producers will attempt to equ
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2. Differences in nonmoney aspects
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were his strikeouts, walks, and hom
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___ 3. To maximize profits, a produ
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___ 19. According to the book, “M
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Multiple Choice: 1. a. 8. c. 15. d.
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Chapter 25 Labor Unions The primary
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The elasticity of demand for union
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Example 4A: Assume that the graph b
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Notice from the graph in Example 6
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Wage Factory A Quantity of Labor S
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As a cartel, a labor union faces a
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___ 10. For a monopsony: a. there i
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3. The graph below represents a lab
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Chapter 26 Interest, Present Value,
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An increase in expected rates of re
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An asset is valuable because we exp
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Example 13B: General Ordnance prove
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Appendix: Present Value Table One f
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___ 4. An increase in expected rate
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Problems: 1. List and explain the t
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Chapter 27 Market Failure The basic
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External Benefit If a market genera
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Example 2: To encourage the consump
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$100 - 90 - 80 - MSC 70 - $ 60 - 50
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A common good is nonexcludable. Non
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___ 5. What government policy would
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4. Based on the information on the
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Chapter 28 Public Choice and Govern
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Candidates and the Median Voter Mod
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Example 8: According to State and F
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Example 10: When Elvis Presley was
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4. Pessimistic bias. This is the te
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___ 5. An elected official will: a.
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2. If a certain policy will yield s
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Chapter 29 Government Regulation of
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underproduction is the amount that
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micromanagement results in business
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market. They may agree with their c
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Questions for Chapter 29 Fill-in-th
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___ 10. The public interest theory
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4. List the four types of costs imp
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Chapter 30 Agriculture and Health C
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weather may cause bumper crops. Bad
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Security and Rural Investment Act o
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Example 12: From 1960 to 2013, the
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1. NHI would provide universal heal
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d. Insurance providers are not allo
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Answer questions 7. through 10. by
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___ 21. If there were no individual
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Chapter 31 Income Distribution and
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Income is more equally distributed
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over a typical career is the accumu
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Ideal Income Redistribution The ide
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Poverty - a family whose income fal
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Appendix: Income Inequality around
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How is this story an analogy for th
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___ 2. In 2013, the Lowest Income 6
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Problems: 1. Explain the two primar
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Absolute advantage - when one natio
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Fiat money - money by government de
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Nonrivalrous good - a good for whic
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Absolute advantage, 16-9 Absolute e
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“Company town”, 25-6 Comparativ
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Eli Lilly and Company, 22-1 Emergen
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Houston, Texas, 15-10 Human capital
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Market, 3-1, 3-8-9 Market basket, 4
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Political bias, 9-4, 12-7 Political
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Short run production, 20-2-3 Short-
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Upturns, 9-4 USDA, 27-9, 30-1-2, 30
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