321LecNote02Ch2

321LecNote02Ch2 - Instructor : Kim, H.H. Spring 2011...

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Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 1 Chapter 2. The Data of Macroeconomics Gross Domestic Product: Expenditure and Income Two definitions: – Total ____________ on domestically-produced final goods and services. – Total ____________ earned by domestically-located factors of production. The Circular Flow Value added : The value of output minus the value of the _______________________ used to produce that output NOW YOU TRY: Identifying value-added A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and sells it to a baker for $3.00. The baker uses the flour to make a loaf of bread and sells it to an engineer for $6.00. The engineer eats the bread. Goods Labor
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Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 2 Compute value added at each stage of production and GDP Answer Final goods, value added, and GDP • GDP = value of final goods produced = ______________________________________________________________________ • The value of the ____________ goods already includes the value of the ____________ goods, so including intermediate and final goods in GDP would be double-counting. The expenditure components of GDP _______________, C _______________, I ________________________, G _______________, NX
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Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 3 An important identity: ___________________________________ Consumption (C) definition: The value of all goods and services bought by households. Includes: durable goods last a long time e.g., ______________________________ nondurable goods last a short time e.g., ______________________________ services work done for consumers e.g., ______________________________ U.S. consumption, 2008 Investment (I) Spending on goods bought for future use ( i.e. , _______________) Includes: Business fixed investment Spending on plant and equipment Residential fixed investment 42.6 20.8 7.2 70.5% 6,069.6 2,965.1 1,023.2 $ 10,057.9 Services Nondurables Durables Consumption % of GDP $ billions
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Instructor : Kim, H.H. Intermediate Macro Analysis Spring 2011 Economics 01:220:321 4 Spending by consumers and landlords on housing units Inventory investment The change in the value of all firms’ inventories U.S. Investment, 2008 Investment vs. Capital Note: ____________________________________________________________ Example (assumes no depreciation) : 1/1/2009: economy has $500b worth of capital during 2009: investment = $60b 1/1/2010: _____________________________________________ Stocks vs. Flows A stock is a __________________________________________ . E.g
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321LecNote02Ch2 - Instructor : Kim, H.H. Spring 2011...

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