ECON chapter reading guides - Chapter 8 GDP Measuring Total Production and Income Ford Motor Company Feels the Effects of the Recession spring of 2009

ECON chapter reading guides - Chapter 8 GDP Measuring Total...

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Chapter 8 GDP: Measuring Total Production and Income Ford Motor Company Feels the Effects of the Recession spring of 2009 the U.S. economy suffered from its worst downturn since the 1930s, sales of Ford cars and trucks plummeted Intro: Microeconomics: is the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices economists generally study individual markets, such as the market for personal computers Macroeconomics: the study of economy as a whole, including topics such as inflation, unemployment, and economic growth economists study factors that affect many markets at the same time analyzes both what determines a country’s rate of economic growth and the reasons growth rates differ greatly across countries analyzes what determines the total level of employment in an economy is concerned with the linkages among economies: international trade and international finance provides information that consumer and firms need in order to understand current economic conditions and to help predict future conditions can help aid the fed. gov’t in designing policies that help the U.S. economy perform more efficiently Business cycle: alternating periods of economic expansion and recession expansion: a period during which total production and total employment are increasing recession: a period during which total production and total employment are decreasing Economic growth: the ability of an economy to produce increasing quantities of goods and services necessary to maintain living standards; in Africa, little economic growth has occurred resulting in a lot of poverty Inflation rate: the percentage increase in the average level of prices from one year to the next is affected by business cycle and by other long-run factors Gross Domestic Product Measures Total Production GDP: the market value of all final goods and services produced in a country during a period of time, typically one year The BEA complies the data needed to calculate GDP we measure production by taking the value, in dollar terms, of all goods and services produced we include only the value of final goods and services ( is purchased by its final user and is not included in the production of any other good or service; ex: hamburger produced by a consumer and a computer purchased by a business) sometimes good and services become apart of others(intermediate good or service: a good or service that is an input into another good or service, such as a tire on a truck) double counting occurs when the value of the tire would be counted once when the tire company sold it to Ford and second when Ford sold the truck to a consumer includes only production that takes place during the indicated time period
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doesn’t include the value of used goods How to Calculate GDP: determine which goods or services should even be calculated (is it un-used? it is final?)
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