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Unformatted text preview: 4/5/10 Problem Set 1 on the Web, due next Monday Shortcomings of GDP As a measure of production o Black market sector not included o Household production not included o Government expenditures valued at its cost o Quality of products not taken care of Does not account for technological shifts For computers, cell phones, etc. the product is broken up by its components and valued by each component As a measure of welfare o Value of leisure not included o Part of GDP is invested and does not affect current living standards o Does not account for distribution of income Read: The Economist, Grossly Distorted Picture If leisure was included as a measure of welfare, then the GDP would be less severe in the current recession Decomposing Nominal GDP o Changes and Prices and Changes in Quantities = Change in Nominal GDP o How to decompose between these two? Price Indexes o Measures increases in price level o Weighted average of the prices of a set of goods o 2 indexes...
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This note was uploaded on 08/27/2011 for the course ECON 101 taught by Professor Dumbass during the Spring '08 term at UCSB.
- Spring '08