Macro - Class 3 - Sept 22nd EXAMPLE: 2 producers Tomato...

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Sept 22 nd EXAMPLE: 2 producers Tomato farmers tomato paste company Consumers No government Tomato farmer $1000 – value of tomatoes $600 –sales to consumers $400 –sales to tomato paste company $650 –wages Tomato paste company $1200 -Value of output (sold to consumers) $400- buys tomato paste $500 –wages Accounting Statement Farmer Revenues 1000 Sales to consumer 600 …comp 400 Expenses 650 Wages Profit 350 Company Revenues 1200 Expenses
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Tomatoes 400 Wages 500 Profits 300 Product Approach Expenditure Approach GDP= C(+I+G+NX) = 600 +1200 = $1800 Income approach GDP = wages + profits = 650+500 + 350+300 = $1800 Total production =Total expenditure = Total income Y=C+I+G+NX Fundamental Identity of Nation Income Accounting Real vs Nominal GDP Aggregation issue, instead of adding quantities we add of values, otherwise it is like adding apples and oranges. Value = Price * Quantity If you use current market prices; you get nominal GDP to calc real GDP you pick a year, a base year
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Macro - Class 3 - Sept 22nd EXAMPLE: 2 producers Tomato...

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