Ch05-8e_macroyas2-1

Ch05-8e_macroyas2-1 - CHAPTER 5 Measuring GDP and Economic...

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Measuring GDP and Economic Growth CHAPTER 5
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After studying this chapter you will be able to Define GDP Explain the two methods used by the Bureau of Economic Analysis to measure U.S. GDP Explain real GDP and the GDP deflator to separate economic growth from inflation uses and limitations of real GDP
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Gross Domestic Product GDP Defined GDP or gross domestic product is the market value of all final goods and services produced in a country in a given time period. This definition has four parts: Market value Final goods and services Produced within a country In a given time period
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Gross Domestic Product Market Value GDP is a market value—goods and services are valued at their market prices. To add apples and oranges, computers and popcorn, we add the market values so we have a total value of output in dollars.
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Gross Domestic Product Final Goods and Services GDP is the value of the final goods and services produced. A final good (or service) is an item bought by its final user during a specified time period. (computer, car etc.) an intermediate good , is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service. (chips, tires etc.) Excluding intermediate goods and services avoids double counting.
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Gross Domestic Product The Bureau of Economic Analysis uses two approaches to measure GDP: The expenditure approach The income approach
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Gross Domestic Product Aggregate expenditure Total expenditure on final goods and services, equals the value of output of final goods and services, which is GDP. Total expenditure = C + I + G + ( X M ). Table 5.1 in the textbook GDP = $9,079 + $2,215 + $2,479 - $765 = $13,008
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Gross Domestic Product Aggregate income Aggregate income : Y-- the total amount paid for wages, interest, rent, and profit. Firms pay out all their receipts from the sale of final goods, so income equals expenditure, Y = C + I + G + ( X M ).
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Gross Domestic Product Financial Flows finance deficits and investment. S:Household saving S is Y: income , T: taxes , C: Consumption Expenditure S = Y – ( T + C ) . Saving flows into the financial markets.
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Gross Domestic Product If G > T , budget deficit=( G T ) government borrows from the financial markets. If
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This note was uploaded on 04/12/2011 for the course ECON 1101 taught by Professor Rappoport during the Fall '08 term at Temple.

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Ch05-8e_macroyas2-1 - CHAPTER 5 Measuring GDP and Economic...

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