Chpt 2 - (Part 2)

Chpt 2 - (Part 2) - GDP: Expenditure Approach In 2006, U.S....

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35 GDP: Expenditure Approach In 2006, U.S. Gross Domestic Product $13,194.7 billion Personal Consumption Expenditures 70.0% Gross Private Domestic Investment 16.7% Government Consumption Expenditures 19.1% Net Exports -5.8% 36 GDP: Expenditure Approach ± Breakdown of Personal Consumption Expenditures: { Consumer Durables 11.4% { Nondurable Goods 29.1% { Services 59.5% ± Breakdown of Private Domestic Investment: { Fixed Investment 97.9% { Inventory Investment 2.1% ± Exports = $ 1,467.6 billion ± Imports = $ 2,229.6 billion 37 Personal Consumption Expenditures 0% 5% 10% 15% 20% 25% 30% 35% 1930 1940 1950 1960 1970 1980 1990 2000 Year % of Personal Consumption Expenditures Housing Food Medical Care 38 GDP: Product Approach ± Product Approach: { The product approach defines a nation’s GDP as the market value of final goods and services newly produced within a nation during a fixed period to time. 39 GDP: Product Approach ± Market value (or current value): { the value of goods and services at the prices at which they are sold ( market prices ). { If we think of market-determined prices as measures of relative economic values , then using market value to measure production will take into account differences in the relative economic importance of different items. 40 GDP: Product Approach ± Market value: Q: What if some commodities are not sold in formal markets ? A: They are either not included or only partially included in GDP. Examples: ² Child care performed within the family without pay . ² Activities that improve the environment. ² Activities in the underground economy.
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41 GDP: Product Approach ± Final goods and services: { Intermediate goods are those used up in the production of other goods in the same period that they themselves were produced. { But not all inputs in production are being used up in the same period. 42 GDP: Product Approach Example: ± In order to produce new cars, a manufacturer has to use steel, tires, glasses etc. These are intermediate inputs. ± This year the manufacturer also { Build a new factory { Buy a newly developed software for designing new models. 43 GDP: Product Approach { Capital good : good that is itself produced, used to produce other goods but is not used up in the same period that it is produced. { Examples: buildings, machinery, software.
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This note was uploaded on 08/11/2008 for the course ECON 103a taught by Professor Suen during the Winter '08 term at UC Riverside.

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Chpt 2 - (Part 2) - GDP: Expenditure Approach In 2006, U.S....

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