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econnotesoct30 - Curve for Exam 1 Add 12 points to score...

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Curve for Exam 1 Add 12 points to score Extra credit will be offered Real GDP: production of goods and services valued at constant base-year prices Nominal GDP: same, but with current prices Nom GDP: Yr 1 = $3600 Yr 2 $6900 Yr 3 $7470 Real GDP Yr1 = 3600 2 = 5600 3 = 5100 GDP Deflator: A measure of the price level calculated as (Nominal GDP/Real GDP) x 100 (Price effect, quantity effect)/quantity effect [leaves price effect] yr 1: (3600/3600) x100=100 yr 2: (6900/5600) x 100 = 123.21 yr 3: (7470/5100) x100=146.47 Inflation measures percent change in price levels Percentage change of GDP deflation % change = (new-old)/old yr2, yr1: (123.21 – 100)/100=23.21% Yr3, Yr2: 146.47 – 123.21)/123.21 = 18.88% Recessions = declines (2 quarters of declining GDP) Is GDP a good measure of a steady economic well-being? All non-market transactions not included in GDP If everyone worked 15 hrs/day, GDP would increase… GDP doesn’t take into account leisure time (GDP would say we’re better off, but we would not necessarily be better off) GDP doesn’t capture environmental quality
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