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14.02_lecture_2

14.02_lecture_2 - TOPIC TOPIC 1 Introduction to Macro Data...

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TOPIC 1 I d i M D Introduction to Macro Data
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Goals and Outline of Topic 1 1. Gross Domestic Product (GDP) What is Gross Domestic Product and how we measure it? Why is this measure important? What are the definitions of the major expenditure components? What are the trends in these components over time? 2 Inflation 2. Inflation What is the difference between ‘Real’ and ‘Nominal’ variables? How is inflation measured? 3. Interest Rate How is inflation measured? Why do we care about Inflation? 4. Unemployment How is Unemployment measured? Why do we care about Unemployment? 2
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PART I: GDP
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Gross Domestic Product (GDP) GDP is a measure of output! Why Do We Care? Because output is highly correlated (at certain times) with things we care about (standard of living, wages, unemployment, inflation, budget and trade deficits, value of currency, etc…) Formal Definition: GDP is the Market Value of all Final Goods and Services Newly Produced on Domestic Soil During a Given Time Period (different than GNP) 4
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