Lec_3_Real_GDP

Lec_3_Real_GDP - EC 400 Real GDP GDP is the total market...

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EC 400 1 Real GDP GDP is the total market value of all goods and services produced within the United States during a specific period of time. Important Points about GDP • Only final goods count. Important Points about GDP • Only final goods count. • Only goods produced during the year count.
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EC 400 2 Important Points about GDP • Only final goods count. • Only goods produced during the year count. • Only goods produced within the United States count. Important Points about GDP • Only final goods count. • Only goods produced during the year count. • Only goods produced within the United States count. • It is a measure of the “value” created within our borders. Important Points about GDP • Only final goods count. • Only goods produced during the year count. Ol d d d i th i th Ui td • Only goods produced within the United States count. • It is a measure of the “value” created within our borders. • It is a measure of the “value” created during a specific period of time.
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EC 400 3 GNP versus GDP • GDP measures value created within the borders of the USA, while GNP measures value created by • while GNP measures value created by American owned assets and Americans working both at home and abroad. Ways of Measuring GDP 1. earnings or income approach 2. expenditure or output approach 3. value-added approach Expenditure Approach •GDP = = n 1 i i i q p where p i is the price of the i th final good and q i is the quantity of the i th final good.
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EC 400 4 Is it a Final Good? • A final good is one purchased for final use and not for resale or further processing. • Clearly it is the use to which a good is put, rather than its attributes that determine rather than its attributes that determine whether it is final. Is it a Final Good? • Shampoo purchased by a consumer is a final good. But shampoo purchased by a salon is not a final good. Flour purchased by a consumer is a final • Flour purchased by a consumer is a final good, but not flour purchased or by a bakery. Is it a Final Good—con’t? • Natural gas purchased by a consumer is a final good, but not natural gas purchased by a business. The services of a security guard provided • The services of a security guard provided by the government is a final good, but not the services of a security guard hired by a business to protect its own property.
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EC 400 5 Implementing expenditure Approach • Divide final goods into 4 main components Implementing expenditure Approach • Divide final goods into 4 main components • Subdivide main components into smaller and smaller sub-groups Implementing expenditure Approach • Divide final goods into 4 main components • Subdivide main components into smaller and smaller sub-groups • Add up expenditures on the subgroups to get GDP
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This note was uploaded on 09/14/2009 for the course EC 400 taught by Professor Cover during the Spring '09 term at Alabama.

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Lec_3_Real_GDP - EC 400 Real GDP GDP is the total market...

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