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Lecture_3_post - Lecture 3 Principles of Macroeconomics Econ 2 Spring 2009 Tracking the Economy • First Friday of every month • Employment

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Unformatted text preview: Lecture 3 Principles of Macroeconomics Econ 2 Spring, 2009 Tracking the Economy • First Friday of every month: • Employment report Tracking the Economy • BLS employment situation Tracking the Economy QuickTimeª and a decompressor are needed to see this picture. Tracking the Economy QuickTimeª and a decompressor are needed to see this picture. Tracking the Economy QuickTimeª and a decompressor are needed to see this picture. Tracking the Economy • monitoring Bernanke and the Fed GROSS DOMESTIC PRODUCT: EXPENDITURES APPROACH Y = C + I + G + (X - M) To calculate GDP: Exports Investment Consumption Government Purchases (the total value of foreign goods and services that are bought in the US) Imports GDP COMPONENTS: U.S. 0.00 0.15 0.30 0.45 0.60 0.75 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 Share of total GDP Consumption Government Investment Source: Bureau of Economic Analysis IMPORTS AND EXPORTS: U.S. 400 800 1,200 1,600 2,000 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 Billions of dollars (chained $2000) Exports Imports Source: Bureau of Economic Analysis The Components of Consumption 1960 2005 Services Services Durables Durables Nondurables Nondurables Source: Bureau of Economic Analysis The Components of Investment 1960 2005 Non-residential Structures Software & Equipment Residential Structures Non-residential Structures Software & Equipment Residential Structures Source: Bureau of Economic Analysis The Components of Government Purchases 1960 2005 State & Local State & Local Federal Non-defense Federal Defense Federal Defense Federal Non-defense Source: Bureau of Economic Analysis Data from our artificial economy Corn Producer • 2006 Production: 10 million bushels • 6 million to hog farmer and • 4 million to consumers • Sold at $2.00 per bushel • Total revenue: $20 million Corn Producer Total Revenue $20 million Wages $5 million Interest on loan $0.5 million Taxes $1.5 million Hog Producer Total Revenue $30 million Wages $4 million Cost of feed corn $12 million Taxes $3 million • 20 million pounds of hogs • Sold at $1.50 per pound to consumers Artificial Economy • After-tax profits = Total Revenue - Wages - Interest - Cost of intermediate inputs - taxes Corn producer $13 million Hog producer $11 million After-tax profits Consumers Wage income $14.5 million Interest income $0.5 million Pay Taxes $1 million Profits $24 million Artificial Economy • Government sector Tax Revenue $5.5 million Wages $5.5 million GDP: Expenditure Approach • GDP = C + I + G + ( X - M ) • In the artificial economy C is: • A) 14.5 million • B) 24 million • C) 30 million • D) 38 million • E) 43.5 million GDP: Expenditure Approach • GDP = C + I + G + ( X - M ) • In the artificial economy C is: • D) 38 million GDP: Expenditure Approach: Artificial Economy • Consumers bought • $8 million corn • $30 million hogs GDP: Expenditure Approach...
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This note was uploaded on 11/01/2009 for the course ECON ECON2 taught by Professor Rupert during the Spring '09 term at UCSB.

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Lecture_3_post - Lecture 3 Principles of Macroeconomics Econ 2 Spring 2009 Tracking the Economy • First Friday of every month • Employment

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