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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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