Chapter 3

Chapter 3 - Short Run: The Goods Market (Blanchard ch. 3)...

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Unformatted text preview: Short Run: The Goods Market (Blanchard ch. 3) Prof. Irina A. Telyukova UCSD Econ 110A Spring 2008 2 Outline Today we will write our first economic model of output determination modeling the goods market. I. We will look at components of the GDP. II. We will model the demand for goods produced by an economy. III. We will then describe the e q u i l i b r i u m of our model economy, in two different ways. 3 I. Components of the GDP s What are the goods produced in the economy and who buys them? a d e m a n d - s i d e question. s We decompose the GDP into its parts to ask questions about d e m a n d for output. s Components of GDP: Consumption, Investment, Government spending, Net exports, Inventory investment. 4 (a) Purchases of U.S. Goods by U.S. consumers, firms, govt. s Consumption (C) goods and services purchased by consumers. In 2003, 70.5% of U.S. GDP. s Investment (I) 15% of GDP in 2003. Sum of - s Nonresidential: purchase by firms of new plants/machines s Residential: purchase by consumers of n e w houses/apartments s Government spending (G) purchase of goods and services by the government (federal and state). Does not include government transfers. 19% of GDP in 2003 5 (b) Foreign sector s Imports (IM) purchases of foreign goods and services by U.S. firms, consumers and government. -14% of 2003 U.S. GDP. s Exports (X) purchases of U.S. goods and services by foreigners. 9.5% of 2003 U.S. GDP. s Net exports = X-IM. In computing how much of domestic output is purchased, we add exports but subtract imports. 6 (c) Inventory Investment s Inventory investment the difference between production and sales. (-$1 billion in 2003)....
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This note was uploaded on 04/29/2008 for the course ECON 110A taught by Professor Staff during the Spring '08 term at UCSD.

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Chapter 3 - Short Run: The Goods Market (Blanchard ch. 3)...

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