Chap05-09S - GettingStarted Measuringeconomicactivityisan

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5 - 2 5-2 Getting Started  Measuring economic activity is an  essential first step to assess and solve  economic concerns    Many countries struggle with low or highly  variable growth rates of output or  with high  unemployment rates  Argentina, for example, has suffered  with dramatic changes in output growth  rates and with very high unemployment  rates
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5 - 3 5-3 GDP Growth Rates in  Argentina 1996 – 2004 -15.00% -10.00% -5.00% 0.00% 5.00% 10.00%
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5 - 4 5-4 Unemployment Rates in  Argentina 1995-2002 0 2 4 6 8 10 12 14 16 18 20 1 2 3 4 5 6 7 8
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5 - 5 5-5 Measuring Output   Gross domestic product - GDP  The market value of the final goods  and services produced in a country  during a given period  Using  market values  of different  goods and services allows  economists to aggregate the  quantities of many different goods  and services  Using  market values  allows the  adding of apple output to banana  output to steel output
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5 - 6 5-6 Measuring Output  Market Value  A convenient way to add together or  aggregate many different goods.  But not all valuable goods and services are  bought and sold in markets  For example, unpaid work of a  homemaker is not sold in markets, but paid  housekeeping and child care services are  sold in markets  Pitfalls can be created if changes lead to  more or less of output sold in markets  Output of government is counted although it  may not go through a market
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5 - 7 5-7 Measuring Output  Final good or service  A good or service that is  produced for its final user and not as  a component of another good or  service  Intermediate good or service    A good or service that is  produced by one firm, bought by  another firm, and used as a  component of a final good or service
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Measuring Output  Final goods or services  Goods or services consumed by the ultimate  user  The end products of the production process  Counted as part of GDP  Intermediate goods or services  Goods or services used up in the production of  final goods and services  They are counted indirectly since their value is  already included in the final product value   If the intermediate good is not currently  produced then its value must be subtracted  from the final product value to avoid double- counting the intermediate good
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5 - 9 5-9 Measuring Output  Suppose, in 1999, steel output is $100,000 and  auto companies buy $60,000 of steel, but produce  no cars.  In 2000, assume steel output is $0 and  auto companies use $50,000 of steel to produce  $300,000 of autos.  How much is GDP for each  year?
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Chap05-09S - GettingStarted Measuringeconomicactivityisan

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