Ch12-Data_in_Macro - CHAPTER12...

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1 Chapter Twelve CHAPTER 12 The Science & Data of Macroeconomics
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2 Chapter Twelve Gross Domestic Product (GDP) is the dollar value of all final goods and services produced within an economy in a given period of time. The consumer price index (CPI) measures the level of prices. The unemployment rate tells us the fraction of workers who are unemployed.
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3 Chapter Twelve Two ways of viewing GDP Total income of everyone in the economy Total expenditure on the economy’s output of goods and services Households Firms Income $ Labor Goods Expenditure $ For the economy as a whole, income must equal expenditure . GDP measures the flow of dollars in the economy. Income, Expenditure, And the Circular Flow
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4 Chapter Twelve 1) To compute the total value of different goods and services, the national income accounts use market prices. Thus, if $0.50 $1.00 GDP = (Price of apples × Quantity of apples ) + (Price of oranges × Quantity of oranges ) = ( $0.50 × 4 ) + ( $1.00 × 3 ) GDP = $5.00 2) Secondhand goods are not included in the calculation of GDP. 3) The treatment of inventories depends on if the goods are stored or if they spoil. If the goods are stored, their value is included in GDP. If they spoil, GDP remains unchanged. When the goods are finally sold, they are considered as secondhand (and are not counted).
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5 Chapter Twelve 4) Intermediate goods are not counted in GDP– only the value of final goods. Reason: the value of intermediate goods is already included in the market price. Value added of a firm equals the value of the firm’s output less the value of the intermediate goods
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This note was uploaded on 10/15/2009 for the course ECONOMICS UGC251QD/ taught by Professor Fredku during the Spring '09 term at CUHK.

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Ch12-Data_in_Macro - CHAPTER12...

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