14 Chapter 7 Part I

# 14 Chapter 7 Part I - GDP Readings Zagorsky Chapter 7 Click...

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Introduction In life we often use one or two numbers to summarize a very complex situation. College - GPA Cars - Horsepower Jobs - Pay Health – Temperature
Why Do You Care? We often judge people based on material yardsticks. She has lots of great clothes. He has a mega number of games. We also judge people on improvements or deterioration in their material conditions. She got rich He is now dirt poor. On these dimensions more is better and an increase is much better than a decrease We judge countries using similar yardsticks.

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Inflation Adjusted World GDP per Person in US \$ \$0 \$1,000 \$2,000 \$3,000 \$4,000 \$5,000 \$6,000 \$7,000 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 Year
Graph Shows 2000 years ago average GDP was < \$500 per person From 1000 A.D. to about 1800 economic output per person improved slightly but average was about \$700 per person. Not much real change between Roman Empire and US Independence. Starting in early 1800s, however, output in the world started to increase dramatically. In 2001 figure broke \$6,000 per person. Ten fold increase in two centuries!!!

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Increased GDP Not Spread Evenly North America, (Canada, U.S. and Mexico), currently produces about 1/3 of world output 0% 5% 10% 15% 20% 25% 30% 35% North America Western Europe Sub-Saharan Africa
Definition What is GDP? GDP is the market value of all the goods and services produced in a country in a given time period, minus the value of all goods and services used in the process of production.

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Definition “GDP is the market value” means that the prices used to calculate GDP are how much people actually paid for something, not the price printed on the shelf or stuck on the product. “Goods and services” means it includes both tangible and intangible items that are bought. Difference between a good and a service? A good is something that you can resell
Detailed Definition “Produced” means it includes goods and services currently created, not transactions involving past creations. Buying a car off the assembly line boosts GDP.

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## This note was uploaded on 04/17/2011 for the course EC 102 taught by Professor Zagorsky during the Spring '08 term at BU.

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14 Chapter 7 Part I - GDP Readings Zagorsky Chapter 7 Click...

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