# 9-12 - Measuring GDP Y=C+I+G+(x-m) 1) Expenditures approach...

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Measuring GDP Y=C+I+G+(x-m) 1) Expenditures approach C 70% I 17% G 19% X-m -6% --------------------- 100% 2) Income approach Employee compensation 56% Net interest 5% Rental income 1% Proprietor income 8% Depreciation and tax 20% Profits 10% --------------------------------------------- 100% Calculate GDP -only two goods: Guns and Butter Q P Q P 2005 2006 Guns 5 10 5 12 Butter 10 1 10 3 2005 GDP=5(10) 2006 GDP=5(12) +10(1) +10(3) GDP=60 GDP=90 -notice: GDP increases, but only because prices increase -looks like economy grew Real GDP -"mal" adjusting for inflation 1) Base year method -calculate GDP in each year using "base year" prices -assume 2005 is base year 2005 Q P 2006 Q P Guns 2 10 Guns 3 12 Butter 4 1 Butter 5 2 2005 GDP using 2005 prices 2(10) +4(1) =24 -this is real GDP -in base year this is also "nominal GDP" 2006 GDP using 2005 Prices

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3(10) + 5(1) =35 -this is real GDP -24--->35---46% growth 2) chain-weighted method Step 1: do base year method (recall. ...46% growth)
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## This note was uploaded on 12/12/2008 for the course ECON 29486 taught by Professor Denniswilson during the Fall '06 term at Western Kentucky University.

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9-12 - Measuring GDP Y=C+I+G+(x-m) 1) Expenditures approach...

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