L1 - Measuring macroeconomy • Chapter 2 book 1 and...

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Unformatted text preview: Measuring macroeconomy • Chapter 2, book 1, and Chapter 5, book 2 • Aggregate output • Price level 1 Nominal GDP Nominal GDP is the current dollar (or euro, etc.) value of all the final goods and services that an economy produces during a specific period such as year or quarter. 2 • The current-dollar value—the value is based on the current market prices – How to compare nominal GDP of different years? – How about goods and services not traded market? • Final not intermediate (avoid double counting) – Bread is final; – Flour to produce bread is intermediate. • Newly produced – A house built in 1999 contributes to year 1999 GDP; – A house built in 1990 does not. 3 Computing nominal GDP Multiply the quantity of each final good (or service) by the current price of the good (or service), and add the numbers up. Example: Two final goods in an economy in 1990, apple and banana. • Q of Apple in 1990: 20; P of Apple in 1990: 2 dollars • Q of Banana in 1990: 10; P of Banana in 1990: 3 dollars Nominal GDP in 1990= 20 × 2 + 10 × 3 = 70 dollars 4 Real GDP Real GDP is the value of all the final goods and services that an economy produces during a specified period in terms of dollar of a base year. • Nominal GDP in year 2007 is in year 2007 dollar. • Real GDP in year 2007 is in the base year dollar. • The base year can be arbitrary; but it must be fixed for comparison....
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This note was uploaded on 10/19/2008 for the course ECON 3140 taught by Professor Mbiekop during the Fall '07 term at Cornell.

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L1 - Measuring macroeconomy • Chapter 2 book 1 and...

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