ECN 302-602 (2), Measuring Output and the Price Level

ECN 302-602 (2), Measuring Output and the Price Level -...

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Chapter 2 -- Measuring Output and The Price Level Data complied at the National Income and Product Accounts (NIPA)
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Measuring Output -- Gross Domestic Product (GDP) Gross Domestic Product -- The total market value of all currently produced final goods and services over a period of time. Nominal GDP -- GDP in current dollars Real GDP -- GDP in constant dollars.
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Aspects of GDP Definition “Over a Period of Time” GDP is a flow measure. “Currently Produced” GDP excludes the following -- sales of used items -- transfer payments -- purchases of stocks, bonds, or land
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“Market Value” -- the transaction must be recorded and have a specific dollar figure attached GDP excludes -- illegal purchases -- household production
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Final Goods and Services and Measuring GDP Example -- Production of a pair of shoes.
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GDP and Making Shoes Step Value Value Added Farmer 3 3 Packing Plant 7 4 Tannery 13 6 Shoe Manufacturer 25 12 Wholesaler 40 15 Retailer 75 35 Total 163 75
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What Real GDP (Y) Signifies Total Production or Output of final goods and services Total Sales on Final Goods and Services (Approximately) Total Income Correlated With Total Employment
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Computing GDP -- The Expenditure Approach Operative Equation: Y = C + I + G + NX
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Consumption (C) Defined as consumer purchases of final goods and services components of consumption -- nondurable goods -- durable goods -- services largest component of GDP
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Investment (I) Business Purchases of New Plant and Equipment New Residential Housing Changes In Inventories
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ECN 302-602 (2), Measuring Output and the Price Level -...

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