[ECON 1BB3] - Final Exam Guide - Ultimate 90 pages long Study Guide!

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Gdp increases, if prices increase, or if output increases. Example: canada"s gdp is based on only two goods: skates and hockey pucks. *real gdp: in base year nominal gdp will always equal real gdp. Calculate nominal gdp: (price x quantity) + (price x quantity) Calculate real gdp: use initial (base year) price for both categories, but use the quantity for the current year. Consumer price index (cpi): measures overall cost of goods for a typical urban household. Steps to calculating inflation using cpi: fix the basket, cpi=(cost in current year/cost in base year)x100, (pt-pt-1)/pt-1. Example: basket: 10 skates and 20 hockey pucks. 50 marks - multiple choice questions (not many from chapter #1 and #2) Comparison of cpi (p changes, q stays the same) to the gdp deflator (q changes, p stays the same): cpi reflects prices of all goods and services bought by typical consumers. Gdp deflator reflects prices of all goods and services produced domestically.