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Unformatted text preview: ECON 101B: Section 2 Handout Date: 01/21/11 Definition 1 (Nominal) Gross Domestic Product (GDP) is the market value of all final goods and services produced within an economy in a given period of time . Y nom t = ∑ i Q ti P ti Definition 2 Real GDP is GDP expressed in prices of a base period. Y real t = ∑ i Q ti P i Question 1 Explain the meaning of the highlighted words in the above-given definition (’market value’, ’final’, ’within an economy’, ’period of time’). Why are they important for the definition of GDP? Question 2 Why aren’t these items in GDP? • Damage to the environment from BP oil “spill” • The lunch you made for yourself today • Sales of illegal street drugs • A house that used to sell for $700,000 now sells for $300,000 • Yogurt Park buys sprinkles Question 3 Consider how each of the following event is likely to affect real GDP. Do you think the change in real GDP reflects a similar change in economic well-being? 1. A hurricane in Florida forces Disney World to shut down for a month....
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This note was uploaded on 10/04/2011 for the course ECON 101b taught by Professor Staff during the Spring '08 term at University of California, Berkeley.
- Spring '08
- Gross Domestic Product (GDP)