Lecture 3

Lecture 3 - Econ101 Lecture3 PROBLEMSET1 n n OntheWeb...

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Click to edit Master subtitle style Econ 101 Lecture 3 Measurement of Economic Activities
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PROBLEM SET 1 n On the Web n Due Next Monday in class
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Shortcomings of GDP n As a measure of production n black market sector not included n household production not included n government expenditures valued at its cost n quality of products not taken care of n As a measure of welfare n Value of leisure not included n Part of GDP is invested and does not affect  current living standards
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GDP as a measure of welfare n Read: The Economist,  Grossly Distorted Picture ”  (read: on the web)
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How is GDP actually measured? n By Production n Add the  value of production  of all  businesses n By Expenditures n Add the  spending  of all different sectors in  the economy  n By Income
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All three ways are equivalent! n All three approaches give the same  measure of GDP! Product = Expenditure = Income
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1. GDP by Expenditures GDP = total  spending  on all  final  goods and services Consumers . ...   Private consumption  C Firms . .............  Private Investment  I Government . ..  Government Expenditures  G Foreigners ……  Exports  X (minus) ………. . Imports  M GDP = C + I + G + X - M
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n Where to find data? n
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Lecture 3 - Econ101 Lecture3 PROBLEMSET1 n n OntheWeb...

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