{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter2_MacroConcepts

# Chapter2_MacroConcepts - 21 Topic 2 Some Basic...

This preview shows pages 1–13. Sign up to view the full content.

Topic 2: Some Basic Macroeconomic Concepts Gross Domestic Product – GDP - is the market value of all final goods and service produced with in a country (as well as income earned) - in a given period of time (such as a year) - valued at market prices 2-1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
(1) Important Facts about GDP: - GDP is basically a production concept - GDP is a flow variable - Market value 2-2
Example: Item Price Quantity CDs \$15 1000 Tapes \$ 5 2000 o Calculate GDP by multiplying P * Q for each  good and then adding your results together 25000 2-3

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Important Facts about GDP continued… In the national accounts, firms and governments are the units  which produce output in the domestic economic . GDP includes only final goods not intermediate goods 2-4
Items not included in GDP: - used or second hand goods - non-marketed goods and servies - financial assets 2-5

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
How do we actually measure GDP?  Three Methods: o Value-added (production) Approach  o Expenditure Approach o Income Approach 2-6
Value-Added Example Col (i) Col (ii) Col (iii) Col (iv) = Col (ii – iii) Stage of  Production Total  Value Cost of  Intermediate  Products Value Added =       Total  Value - Cost of Intermediate  Products Sheep ranch 60 0 60 Wool processor 100 60 40 Suit  manufacturer 175 100 75 Retail outlet 250 175 75 250 Contribution to GDP: 250 2-7

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Total value of all transactions:  2-8
Income Approach Factors Compensation Land Rent, Labour Wages & salaries Capital depreciation Entrepreneurship Profit, interest and div 2-9

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Income Approach to Measuring GDP (this is in the notes, don’t copy) First determine:  o Net Domestic Income at Factor Cost o Wages, salaries and supplementary labour income  o Corporate profits before taxes 2-10
o Government enterprise profits before taxes 2-11

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
o
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 43

Chapter2_MacroConcepts - 21 Topic 2 Some Basic...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online