LecNote02

LecNote02 - Intro Macro 1 Measuring a Nations Income Slide...

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1 Intro Macro
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Measuring a Nation’s Income Slide #2 June 29 2010 2 Intro Macro
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http://www.nytimes.com/2010/06/26/business/economy/26ec on.html?src=busln 3 Intro Macro
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Real GDP in the United States 4 This figure shows quarterly data on real GDP for the U.S. economy since 1965. Recessions—periods of falling real GDP—are marked with the shaded vertical bars.
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The Economy’s Income and Expenditure Gross Domestic Product (GDP) Measures the total income of everyone in the economy Measures the total expenditure on the economy’s output of goods and services For an economy as a whole Income must equal expenditure Circular-flow diagram assumptions: All goods and services bought by households Households - -spend all of their income 5 Intro Macro
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The circular-flow diagram 6 Households buy goods and services from firms, and firms use their revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners. GDP equals the total amount spent by households in the market for goods and services. It also equals the total wages, rent, and profit paid by firms in the markets for the factors of production.
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Preliminaries: Factors of production are inputs like labor, land, capital, and natural resources. Factor payments are payments to the factors of production (e.g., wages, rent). 7 Intro Macro
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Measurement of Gross Domestic Product Gross domestic product (GDP) Market value of all final goods and services Produced within a country In a given period of time “GDP is the market value…” Market prices - reflect the value of the goods 8 Intro Macro
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Measurement of Gross Domestic Product “… of all…” All items produced in the economy And sold legally in markets Excludes most items Produced and sold illicitly Produced and consumed at home Eg : housing service/ mowing the lawn “… final…” The value when the goods is finished, not it is sold. Eg: inventory Value of intermediate goods is already included in the prices of the final goods 9 Intro Macro
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Product “… goods and services…” “… produced…” Goods and services currently produced Eg: used goods “… within a country…” Goods and services produced domestically, regardless of the nationality of the producer “… in a given period of time” A year or a quarter NOTE: In addition to summing expenditure, the gov’t also calculated GDP by adding up total income in the economy. Intro Macro
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This document was uploaded on 10/28/2011 for the course 220 103 at Rutgers.

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LecNote02 - Intro Macro 1 Measuring a Nations Income Slide...

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