Macro Chapter 5

Macro Chapter 5 - CHAPTER 5 MEASURING NATIONAL INCOME Main...

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CHAPTER 5 CHAPTER 5 MEASURING NATIONAL INCOME MEASURING NATIONAL INCOME
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Main questions What is Gross Domestic Product (GDP)? How is GDP related to a nation’s total income and spending? What are the components of GDP? How is GDP corrected for inflation? Does GDP measure society’s well-being?
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Income and Expenditure Gross Domestic Product (GDP) measures two things at once: total income of everyone in the economy. total expenditure on the economy’s output of goods & services. For the economy as a whole Income = expenditure
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The Circular-Flow Diagram is a simple depiction of the macroeconomy. illustrates GDP as spending, revenue, factor payments, and income. Factors of production are inputs like labour, land, capital, and natural resources. Factor payments are payments to the factors of production. ( e.g ., wages, rent)
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  The Circular-Flow Diagram Markets for Factors of Production Households Income (=GDP) Wages, rent, profit (=GDP) Factors of production labour, land, capital Spending (=GDP) G & S bought G & S sold Revenue (=GDP) Markets for Goods & Services
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Circular flow diagram omits: 1. The government- collects taxes, purchases g&s 2. The financial system - matches savers’ supply of funds with borrowers’ demand for loans 3. The foreign sector - trades g&s, financial assets, and currencies with the country’s residents
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Gross Domestic Product (GDP) The market value of all final goods & services produced within a country in a given period of time. Goods are valued at their market prices. GDP measures all goods using the same units ; things that don’t have market value are excluded.
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Main points: 1. Market value 2. Final goods 3. Currently produced goods and services 4. Within a country 5. In a given period of time
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Components of GDP GDP is total spending. Its four components are: Consumption ( C )
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This note was uploaded on 04/15/2011 for the course ECON 1000 taught by Professor Unknown during the Spring '10 term at Carleton CA.

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Macro Chapter 5 - CHAPTER 5 MEASURING NATIONAL INCOME Main...

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