Econ 333 Nov 18 Ch 12-13

Econ 333 Nov 18 Ch 12-13 - National Income Accounting,...

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Unformatted text preview: National Income Accounting, Balance of Payments, and Foreign Exchange Markets Chapters 12-13 Macroeconomics C + I + G + (X-M) = Y=GDP GDP is a conservative measure of the total output of the economy. GDP numbers always have a downward bias. What is NOT measured in GDP? Goods & Services Prices Trade Balance People decide spending, saving, investing, taxes. Compare those to production, and Residual is Trade Balance X-M = Y C I G Y>C+I+G is Trade Surplus (Net Lender) Y<C+I+G is Trade Deficit (Net Borrower) Leakages and Injections and the Twin Deficits Value of Production > Domestic Spending Saving Taxes Imports (reduced spending on domestic goods) Value of Production < Domestic Spending Investment Government Spending Exports S+T+M=I+G+X, or X-M = S-I + T-G How to Fix Trade Imbalances Fix Trade Deficit Increase savings Decrease investment Decrease government spending/raise taxes Fix Trade Surplus Decrease savings Increase investment Increase government spending/lower taxes Building BOP: Goods (Merchandise Trade); Goods + Services (Net Exports in GDP) Goods Deficit: Net -838 $bill in 2006, -820 $bill in 2007, on target for -820-840 $bill in 2008 as of 9/08 Services Surplus Net 85$bill in 2006, 119 $bill in 2007, on target for 120-140 $bill in 2008 as of 9/08...
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Econ 333 Nov 18 Ch 12-13 - National Income Accounting,...

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