ch.1-8[1] - Intro to Macro ECO 1102 Chapter 5: Measuring a...

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Intro to Macro ECO 1102 Chapter 5: Measuring a Nation’s Income Key Objective: to discuss some of the data that economists and policy makers used to monitor the performance of an economy, for example how rich is a country Gross Domestic Product (GDP) GDP is the market value of all final goods and services produced within a country in a given period of time (loosely speaking, it is how much a country is producing) Statistics Canada releases data on national and provincial gdp every three months From the definition of GDP “GDP is the Market Value…” - Output is valued at market prices “…Of All Final…” - it records only the value of final goods, not intermediate goods (the value is counted only once) “…Goods and Services…” - it includes both tangible goods (food, clothing, cars) and intangible services (haircuts, housecleaning, and doctor visits) “…Produced…” -it includes goods and services currently produced, not transactions involving good produced in the past “…Within a Country…” - it measures the value of production within the geographic confines of a country “…In a Given Period of Time…” - it measures the value of production that takes place within a specific interval of time, usually a year or a quarter (three months) The Components of GDP (important) GDP includes all items produced in the economy and sold legally in markets What is NOT COUNTED in GDP? - GDP excludes most items that are produced and consumed at home and that never enter the marketplace -it excludes items produced and sold illicitly, such as illegal drugs GDP (Y) is the sum of the following:
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- Consumption (C) - Investment ( I ) - Government Purchases (G) - Net Exports (NX) Y=C+I+G+NX *know this Consumption The spending by households on goods and services, with the expectation of purchases of new housing. Investment The spending on capital equipment, inventories, and structures, including new housing. (domestic) Government Purchases The spending on goods and services by local, state and federal governments. Does NOT include transfer payments (e.g. welfare, old age pension) because they are not made in exchange for currently produced goods and services. Net Exports Exports: goods produced domestically and sold aboard Imports: goods produced abroad and bought domestically Exports minus Imports GDP Measures both Income and Expenditures NOTE: GDP measures two things at once -total income of everyone in the economy -total expenditure on the economy’s output of goods and services For an economy as a whole, income must equal expenditure because: -every transaction has a buyer and a seller -every dollar of spending by some buyer is a dollar of income for some seller * read pg 94-95 GDP: Total Expenditure and its Components -Table 5.1 (pg 101) Total ($billion/year) Per Person ($/year) % of Total Gross Domestic Product, Y $1216 $38 481 100% Consumption, C 698 22 088 58 Investment, I 200 6 329 16 Government Purchases, G 266 8 418 22
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This note was uploaded on 12/08/2009 for the course TEFLER ADM1300 taught by Professor Koppel during the Fall '09 term at University of Ottawa.

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ch.1-8[1] - Intro to Macro ECO 1102 Chapter 5: Measuring a...

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