# 4 - Econ 102 Lecture 2/4 Macroeconomic Measurement GDP...

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Econ 102 Lecture 2/4 04/02/2008 14:21:00 Macroeconomic Measurement: GDP Measuring Material Well-Being o To measure the material well-being of a country (output), economists  use the concept of Gross Domestic Product. o GDP is the total value of all final goods and services produced for the  marketplace during a given period, within the nations borders o “the total value” The economy produces many different goods and services How do we aggregate them all together in one number o The trick: use market value calculated at the market prices, and sum  up the dollar value of these good o GDP algebraically GDP in year t=P good1 Q good 1+  P good2  Q good2… Where: P-  price in year t Q- quantity in year t Good1, good2,… are all final goods and serices  produced for the market place in year t, within nations  borders o “…of all final…” Some goods are not sold to the final user Instead, they are purchased by other firms and further  processed We call them intermediate gods Why should we exclude intermediate goods from GDP o Pitfall of counting same thing twice Value worth \$5 has been created in the end(=value of the final  good. If you count all the goods, you count some things at least twice:

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## This note was uploaded on 03/27/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at University of Wisconsin.

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4 - Econ 102 Lecture 2/4 Macroeconomic Measurement GDP...

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