Chapter 2 - Handout-converted.pptx

# Chapter 2 - Handout-converted.pptx - Chapter 2 Measuring...

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Chapter 2 Measuring the Macroeconom y Emily Marshall, Dickinson College Revised, Expanded, and Updated by Simeon Alder U of Wisconsin - Madison Copyright © 2018 W. W. Norton & Company

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2.1 Introduction In this chapter, we learn: The importance of gross domestic product (GDP) The composition of GDP, and how it has changed over time How to use GDP to examine The evolution of living standards Differences in living standards across countries
Introduction National income accounting Method of aggregating the production of diverse goods into a single measure of overall economic activity National accounting is useful tool to describe: State of an economy at a given time  Changes to an economy over time  Differences across countries

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2.2 Measuring the State of the Economy Gross domestic product (GDP)  The market value of the final goods and services produced in an economy over a certain period United States GDP  \$12.5 T in 2005  \$14.4 T in 2008 (\$47,000 per person)  \$19.5 T in 3Q2017 (\$59,800)
Measuring the State of the Economy 1 2005 2006 2007 2008 GDP (in trillions of \$) 12.6 13.4 14.0 14.3 Growth rate GDP 7% 6% 5% 4% 3% 2% 1% 0% U.S. GDP 14.4 14.2 14 13.8 13.6 13.4 13.2 13 12.8 12.6 12.4 2005 2006 GDP (in trillions of \$) 2007 2008 Growth rate GDP

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Measuring the State of the Economy 2 Production measure of GDP Expenditure measure of GDP Income measure of GDP All three ...
The Expenditure Approach The national income accounting identity states: Y = C + I + G + N X where: Y = GDP C = Consumption I = Investment G = Government Purchases NX = Net Export

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Investment (four categories) Business fixed investment (nonresidential):
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