ch7 - NCSU EC-202 PRINCIPLES OF MACROECONOMICS Department...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
NCSU EC-202 PRINCIPLES OF MACROECONOMICS Department of Economics Spring 2008 CHAPTER 7 GDP: Measuring Total Production and Income 1. Recall that economics can be divided into the subfields of microeconomics and macroeconomics: C 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. C Macroeconomics is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth . 2. One of the most important aspects of macroeconomics is to understand how total production is measured. Total production is measured by gross domestic product. Gross domestic product (GDP) is defined as the market value of all final goods and services produced in a country during a period of time. Consider this definition in more details: C GDP is measured using market values, not quantities. C GDP includes only the market value of final goods. Final good or service is a good or service purchased by a final user. Intermediate good or service is a good or service that is an input into another good or service, such as a tire on a truck. C GDP includes only current production. 3. Measuring GDP. 3.1. Expenditure method. The value of total production is equal to the value of total income. The circular-flow diagram shows that one can measure GDP by either calculating the total value of expenditures on final goods and services or by calculating the value of total income. The Bureau of Economic Analysis (BEA) divides its statistics on GDP into four major categories of expenditures: a) Consumption is the part of GDP purchased by households as final users. Almost everything households buy during the year is included as part of consumption spending when we calculate GDP. Excluding:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

ch7 - NCSU EC-202 PRINCIPLES OF MACROECONOMICS Department...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online