CH2MEMO - Economics 3307 Main Points of Chapter 2 1. This...

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Economics 3307 Main Points of Chapter 2 1. This chapter considers the measurement and historical behavior of 3 important macroeconomic variables: Gross Domestic Product (GDP), Inflation, and the Unemployment Rate. 2. GDP during any particular period (usually a year or quarter) is just the total value of all newly- produced final goods and services produced within the borders of a country. a. Nominal GDP values production at prevailing prices. b. Real GDP values production at base year prices. (The current US base year is 2000.) c. Thus, 2006 Nominal GDP is the value of 2006 production at 2006 prices. 2006 Real GDP is the value of 2006 production using 2000 (base year) prices. d. Nominal GDP can change from one year to the next either because (i) the quantities of goods and services produced changes, or (ii) the average prices of goods and services change. e. Real GDP by definition cannot change if prices change, because Real GDP uses the same prices (the base year prices) to value production each and every year. f. Thus when Real GDP changes, it must be because the total quantity of goods and services produced in the economy changes. Therefore, Real GDP is the primary measure of overall production in an economy . 3. In the US, Real GDP is calculated by the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce.
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This note was uploaded on 04/30/2008 for the course ECO 3307 taught by Professor Green during the Spring '08 term at Baylor.

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CH2MEMO - Economics 3307 Main Points of Chapter 2 1. This...

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