Lecuter 9 Notes - ECN 211 Macroeconomic Principles L9: 1...

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03/03/10 1 ECN 211 Macroeconomic Principles L9: National Income Accounting
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03/03/10 2 National Income and Product Accounting (NIPA) … seeks to measure  the output  of an entire economy as well  as  flows  between sectors How can we measure total output of the US economy?
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03/03/10 3 Circular Flow and NIPA Three ways to measure total value of output: Outputs – What is produced Expenditures – What is spent Incomes – What is earned. By definition:   Income=Expenditures=Value of Output
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03/03/10 4 Gross Domestic Product (GDP)  … the  market  value  of all  final  goods and services produced in an  economy  within a year Three aspects to note: – Market Value – Final Goods and Services • Not “all goods” – Period of Account
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03/03/10 5 GDP A larger GDP (usually) means that we have  more  goods  and services that can be used to satisfy our unlimited  wants and needs – The PPC has shifted  outwards How big is US GDP?
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03/03/10 6 GDP 0 2000 4000 6000 8000 10000 12000 14000 1929 1935 1941 1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 Year $ (billions)
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03/03/10 7 Market Value Most activities (outputs) not  traded in a market  are not included in  GDP Its  value  cannot be measured accurately though it  is  productive Thus GDP is an  underestimated  of economic activity Examples:  – Housework – Illegal activities – Barter trades Typically GDP is a  larger  under-estimate of economic activity for  poorer  countries.
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03/03/10 8 Final Goods and Services Only goods and services bought by the  final consumer Don’t count  intermediate goods  to avoid  double counting  
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03/03/10 9
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  • Spring '08
  • Kingston
  • Gdp, Value added, Final goods, net factor income, Shirt Cotton Farmer Textile Mill Shirt Manufacturer Wholesaler Retailer

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