Macroeconomics 9.17

Macroeconomics 9.17 - producing the final output Identity...

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Macroeconomics 9.17.07 Chapter 5, pp88-93; Appendix- Ch 6; Chap 8, pp154-157, Appendix- Chapter 8 National Income Accounting US: Bureau of Economic Analysis- BEA GDP= Gross Domestic Product Nominal GDP= The sum of the money value of the final output of ALL goods and services produced in the domestic economy during a period of time. Approaches: 1. Expenditure Approach 2. Factor income approach 3. Value added approach GDP N = Nominal GDP GDP EXP = expenditure GDP C N =Consumer Expenditures I N = Investment Expenditure a. b. Purchase of new housing c. Inventory Accumulation (Decumulation) X N = Exports M N = Imports Accounting Principle #1: $1 of final output produced must generate exactly $1 of expenditures of final output. Identity: Value of Final output E- Expenditure on final output Accounting Principle #2: $1 of production of final output must generate exactly $1 of income in
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Unformatted text preview: producing the final output. Identity: Value of final output= Income to produce final output. Basic Identity of National Income Accounting Accounting principle #3: $1 of expenditure ob final output must generate $1 of income in producing final output. Identity: Expenditure = Value of final output = Income Applies to actual magnitudes, not necessarily planned magnitude Nominal GDP = GDP in current dollars Real GDP = GDP in constant dollars Measuring the Price Level: Using Price indexes 1. CPI: Consumer Price Index 2. IPD: Implicit Price Deflation for GDP IPD t = GDP N / GDP = Output valued at current prices/ Output value at base year prices = Current prices (prices at time t / base yr prices Ch 8 151-164 Ch 9 text + appx...
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Macroeconomics 9.17 - producing the final output Identity...

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