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11-6 lecture notes

11-6 lecture notes - How are we doing Criteria o Level of...

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How are we doing? Criteria: o Level of output o Growth of output o Unemployment rate o Inflation rate o Budget deficit o Trade deficit o Distribution o Exchange rate o Growth vs. environment Level of output is known as the GDP (gross domestic product) market value of total value produced during a given period of time within the borders of a country Nominal GDP is the market value of the output measured in current prices Growth rate of this output can be found by finding the growth rate of two different years of GDP Nominal GDP rate hides the inflation effect and therefore is undesirable to use as a criterion to find the growth rate Real GDP is found 2 ways o By taking the prices of some reference period and then valuing the output based on that year’s prices o Divide the nominal GDP by a deflator (find the inflation rate since that period and divide that out of the nominal GDP) deflator is 1+inflation rate
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