Chapter12 - P r oduct M ar k ets and N ational Output...

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Product Markets and National Output Chapter 12
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Discussion Topics Circular flow of payments Composition and measurement of Gross Domestic Product (GDP) Consumption, saving and investment Equilibrium national income and output
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Four major sectors In this economy…
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We can measure macro economic activity in either resource markets or product markets. Result is the same… Circular Flow Diagram for General Economy
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Businesses are net borrowers in financial markets while households are net savers…
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Businesses make investment expenditures, Governments make expenditures, and Households make consumption expenditures
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Businesses receive funds from total expenditures in product markets while households, who own businesses, receive wages, rents, interest and profits in resource markets where they provide labor and capital services…
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Measurements of Gross Domestic Product The nation’s annual output is referred to as Gross Domestic Product (GDP) Nominal GDP Real GDP Consumer expenditures are classified as durable goods nondurable goods services
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Everything below zero represents a recession
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GDP = C + I + G + (X – M)
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Types of consumer expenditures…
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Types of investment expenditures…
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Calculation of net exports…
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Types of government expenditures…
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Items not included in GDP…
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Understanding the Domestic Determinants of GDP C, I and G
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