How to measure and explain change in GDP

How to measure and explain change in GDP - 7. Bad Weather...

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How to measure and explain change in GDP Businesses will not produce if it has no customers (no demand) Demand fluctuates over time Unemployment results from the GDP not being big enough Why does demand fluctuate? - Have to look at four types of spending (consumer, investment, government, Imports- exports) Consumer spending = about 2/3 of GDP (fairly stable/passive) This money comes from income, savings, and borrowing What decides spending?: 1. Income (How much you make) 2. Consumer confidence (how much confidence people have in the economy) 3. Wealth (How much wealth a person already has) 4. Interest Rates (cost of borrowing) 5. Consumer Debt Levels (How much debt you have) 6. Expected future inflation (people may want to buy before the price rises)
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Unformatted text preview: 7. Bad Weather (short term) (dont want to drive in bad weather) - Hurricane Katrina Investment spending depends on: 1. Profits 2. Interest rate 3. Tax laws 4. Oil prices 5. Pollution regulations 6. Price controls 7. Capacity utilization (expansion) 8. Biz-con 9. Consumer protection laws (i.e. airbags) 10. Worker protection rights (i.e. OSHA) 11. Corporate debt 12. Vacancy rates Investment is volatile (unlike consumer spending). Government decisions are based more so on politics than economics Net exports depends on 1. exchange rate 2. our trade partners economies 3. protectionism (trade barriers)...
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This note was uploaded on 04/02/2008 for the course ECON 100 taught by Professor Hayworth during the Winter '08 term at Eastern Michigan University.

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How to measure and explain change in GDP - 7. Bad Weather...

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