Econ

Question 1

GDP deflator

Answer 1

GDP deflator = (nominal GDP/real GDP) x 100

Question 2

fundamental relationship between savings, investment, fiscal balance, trade balance

Answer 2

(G – T) = (S – I) – (X – M)

S = household and business savings

Question 3

4 business phases

Answer 3

• expansion (real GDP is increasing)
• peak (real GDP stops increasing and begins decreasing)
• contraction/recession (real GDP is decreasing)
• trough (real GDP stops decreasing and begins increasing)

Question 4

cost-push inflation

Answer 4

Inflation can result from an initial decrease in aggregate supply caused by an increase in the real price of an important factor of production, such as wages or energy.

Question 5

Demand-pull inflation

Answer 5

Demand-pull inflation can result from an increase in the money supply, increased government spending, or any other change that increases aggregate demand.