Macro economics for business - J une 20, 2011 Br ief...

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June 20, 2011 Brief overview of Chapter 1 What is long term economic growth? A sustainable level of living standards, higher wages, increased levels of production, etc. Gross Domestic Products: all the goods and services produced by a nation, the market value of final goods and services newly produced within a nation during a fixed period of time Stagflation is the simultaneous occurrence of high inflation and unemployment Classist economic theory: an approach to macroeconomics based on the assumption that wages and prices adjust quickly Keynesian economic theory: an approach argues that wages and prices adjust slowly and that government can help speed up this process. Chapter 2 National Income Accounting: measures economic activity. Can be measured by the amount of output produced (production approach), the incomes generated by production (Income approach), and the amount of spending by purchasers (expenditure approach) Markets (financial, and goods and services) for factors of production Households: consume[C], labor [L], Income [I] savings [S] Government: gets moneys from household from taxes [T], spending [GS], savings [S] Firms: Factor payments, revenue from the purchase of goods and services Market value: allows adding together unlike items by valuing them at their market prices GDP only counts newly produced final goods and services, does not count intermediate goods and services Capital goods are final goods since they aren’t used up in the same period they are made Inventory Investment (is the amount of unsold finished goods, goods in process, and raw materials have changed during the period) is also treated as a final good
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GNP (gross national product) = output produced by domestically owned factors (a country’s citizen or factories) of production The difference in GDP and GNP is that GNP counts the final amount of goods and services produced by people of a certain nationality. Example an American living England has a salary that is included in Americas GNP and England’s GDP. The variation between GDP and GNP is small because of NFP. The smaller NFP is the closer GNP and GDP is. NFP (net factor payments from abroad): payments to domestically owned factors located abroad minus payments to foreign factors located domestically GDP= GNP-NFP The expenditure approach to measuring GDP: Measures total spending on final goods and services produced within a nation during a specified period of time 4 main categories of spending : consumption [C], investment [I], government purchases of goods and services [G], net exports [NX] Y= C+I+G+NX} is the income expenditure identity NX= Exports- Imports (EX-IM) Consumption: spending by domestic households on final goods and services (including those produced abroad) accounts for 2/3 of GDP 3 Categories of consumption Consumer durables: “long- lived” consumer items. i.e. cars, computers Nondurables: short-term goods that do not last long i.e. clothes, fuel, food Services: examples: education, health care, financial services, transportation
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This note was uploaded on 09/11/2011 for the course ECON 3006 taught by Professor Keeler during the Spring '11 term at California State University , Monterey Bay.

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Macro economics for business - J une 20, 2011 Br ief...

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