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In a free market the equalibrium price will be acceptable to both

Consumers and supliers


Gross Domestic Product- the total market value of all final goods and services produced annually in an economy

GDP calculation

= C+I+G+(X-M)


Expenditures on (production of) new plant, equipment, and structures (capital) in a given time period, plus changes in business inventories. Such as constuction

Government Spending

G = Government Spending (or purchases) - all goods and services bought by government. Excludes transfer statments and interest on debt

Change in inventories is how

you determine if you are going in our out of a resicion

United States has

twice the GDP as China per polulation

US government spending

has increased as a porportion of GDP spikes in World War I and II

US government insurance recipients

increase when there is a resescion


Amount of money spent OVER the amount collected over a one year period.


(see liabilities) - are amounts owed by the business and represent amounts that individuals or organizations have lent to the business.

GDP Deflator

100 X (nominal GDP/real GDP)

Causes of Inflation

Market Power ability t assume competitave presseure

Causes of Inflation

Demand pull- ris ein demand is relative to supply

Causes of Inflation

Boom in Asset Maret- increaed demand for tangible itemss

Causes of Inflation

Supply Shock when like a hurricane destory much of the supply

Inflation is good

good for borrowers and the government becuase the value of the debt is reduced

Cpi Equation

CPI = (updated/base) * 100

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