ECON20023 Lecture 9 extras

ECON20023 Lecture 9 extras - Production and Gross Domestic...

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2004 1 Production and Gross Domestic Product, GDP: A Definition Economists have been measuring total  production of economies since 1930s Techniques introduced by Keynes Many conceptual traps and pitfalls This is why economists have come up with a  very precise definition of GDP The nation’s gross domestic product (GDP)  Total value of all final goods and services  produced for the marketplace during a given  period within the nation’s borders
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2004 2 Production and Gross Domestic Product, GDP: A Definition The total value Approach of GDP is to add up dollar value of every good or  service—the number of dollars each product is sold for However, using the dollar prices at which goods and  services actually sell also creates a problem If prices rise, then GDP will rise, even if we are not actually  producing more GDP must be adjusted to take away the effects of inflation …of all final… When measuring production, we do not count every good  or service produced in the economy Only those that are sold to their final users Avoids over-counting intermediate products when  measuring GDP
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2004 3 Figure 3: Stages of Production $1.00 (Wood Chips) Lumber Mill $1.50 (Raw Paper) Paper Mill $2.25 (Notebook Paper) Office Supplies Manufacturer $3.50 (Notebook Paper) Wholesaler $5.00 (Notebook Paper) Retailer
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2004 4 Production and Gross Domestic Product, GDP: A Definition …goods and services… We all know a good when we see one Final services count in GDP in the same way as final  goods Value of all intermediate products is automatically  included in value of final products they are used to create …produced… In order to contribute to GDP, something must be  produced During the period being considered 
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2004 5 Production and Gross Domestic Product, GDP: A Definition …for the marketplace… GDP does not include all final goods and services  produced in the economy Includes only the ones produced for the marketplace—that  is, with the intention of being sold …during a given period… GDP measures production during some specific  period of time Only goods produced during that period are counted GDP is actually measured for each quarter, and then  reported as an annual rate for the quarter Once fourth quarter figures are in, government also reports  official GDP figure for entire year
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2004 6 Production and Gross Domestic Product, GDP: A Definition …within the nation’s borders
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This note was uploaded on 09/06/2009 for the course MGMT econ taught by Professor Galinaivanova during the Spring '09 term at University of Central Arkansas.

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ECON20023 Lecture 9 extras - Production and Gross Domestic...

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