Lecture1_MacroVariables

Lecture1_MacroVariables - EC3024 Managerial Macroeconomics...

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EC3024 Managerial Macroeconomics Key Macroeconomic Variables
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The Goods Market Supplier: producers Demander: households, businesses, government agencies, foreigners How to aggregate the total quantity of goods and services produced? How to aggregate different prices? 2
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3 National income and product accounts are an accounting system used to measure aggregate economic activity. Aggregate Output GDP: G ross D omestic P roduct The total value of all final goods and services produced for the marketplace during a given period, within the nation’s borders
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Aggregate Output 4 Three approaches to calculate GDP GDP is how much the economy produces GDP is how much income the economy earns GDP is how much the economy spends
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5 1. Value added approach GDP is the sum of the value added by all firms Value added equals the value of a firm’s production minus the value of the intermediate goods it uses in production. Three approaches to calculate GDP Aggregate Output
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6 2. Income approach GDP is the sum of incomes earned by all households Wages and Salaries: labor Rent: land and natural resources Interest: capital Profit: entrepreneurship (firm owners) Aggregate Output Three approaches to calculate GDP
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7 3. Expenditure approach GDP is the sum of the value of goods and services purchased by each type of final user. Consumption (by households) Investment (by businesses) Government spending (by government agencies) Net export (by foreigners) Aggregate Output Three approaches to calculate GDP
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8 Nominal GDP is the sum of the quantities of final goods produced multiplied by their current prices.
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