Chapter_23 - Chapter 23Chapter 10 Measuring A Nations...

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Unformatted text preview: Chapter 23Chapter 10 Measuring A Nations Income WHATS NEW IN THE THIRD EDITION: More detail has been added on The Components of GDP. There is also a new Case Study on Who Wins at the Olympics? LEARNING OBJECTIVES: By the end of this chapter, students should understand: why an economys total income equals its total expenditure. how gross domestic product (GDP) is defined and calculated. the breakdown of GDP into its four major components. the distinction between real GDP and nominal GDP. whether GDP is a good measure of economic well-being. CONTEXT AND PURPOSE: Chapter 10 is the first chapter in the macroeconomic section of the text. It is the first of a two-chapter sequence that introduces students to two vital statistics that economists use to monitor the macroeconomyGDP and the consumer price index. Chapter 10 develops how economists measure production and income in the macroeconomy. The following chapter, Chapter 11, develops how economists measure the level of prices in the macroeconomy. Taken together, Chapter 10 concentrates on the quantity of output in the macroeconomy while Chapter 11 concentrates on the price of output in the macroeconomy. The purpose of this chapter is to provide students with an understanding of the measurement and the use of gross domestic product (GDP). GDP is the single most important measure of the health of the macroeconomy. Indeed, it is the most widely reported statistic in every developed economy. 1 2 Chapter 23/Measuring A Nations Income Chapter 23/Measuring A Nations Income 3 KEY POINTS: 1. Because every transaction has a buyer and a seller, the total expenditure in the economy must equal the total income in the economy. 2. Gross domestic product (GDP) measures an economys total expenditure on newly produced goods and services and the total income earned from the production of these goods and services. More precisely, GDP is the market value of all final goods and services produced within a country in a given period of time. 3. GDP is divided among four components of expenditure: consumption, investment, government purchases, and net exports. Consumption includes spending on goods and services by households, with the exception of purchases of new housing. Investment includes spending on new equipment and structures, including households purchases of new housing. Government purchases include spending on goods and services by local, state, and federal governments. Net exports equal the value of goods and services produced domestically and sold abroad (exports) minus the value of...
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Chapter_23 - Chapter 23Chapter 10 Measuring A Nations...

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