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Unformatted text preview: Lecture 8 2/26/08 Government gets money from us from taxes and borrowing (finance) Y=C+I+G+X-M (subtract out the imported goods from what we consume) 2.2 trillion of what we buy is from foreigners. Spending total 9.2 trillion total, and 7 trillion is domestically bought. Components of GDP GDP (production) = Expenditure + Inventory Services...Housing, Housing operation, transportation, medical Nondurable Goods...foods, gas in your, clothing Durable Goods...Appliances, home furnishing, automobiles, things that last at least 3 years. Transfer payments are not included in government purchases Welfare payments Social security benefits Nominal GDP=Current $ GDP P Y^1 + Y P^1 + P Y Real GDP = Nominal GCP X (Relative Prices) P^2Y^2 (P^1/P^2) = P^1 Y^2 Real GDP = P^1 Y^2 - P^1 Y^1 <= Volume Effect = P^1 (Y^2 -Y^1) Y = P^1 = PY (value of final goods) - wL (wage rate) x (Labor) - iD (interest rate borrow at) x (debt they borrow) - PcC (Value of the Intermediate good P x Amount) - rent ...
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This note was uploaded on 04/15/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at Wisconsin.
- Spring '08