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Chapter2

# Chapter2 - Chapter2 The Data of Macroeconomics CHAPTER 2...

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slide 1 Chapter 2 The Data of Macroeconomics CHAPTER 2 The Data of Macroeconomics

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slide 2 CHAPTER 2 The Data of Macroeconomics In this chapter, you will learn… …the meaning and measurement of the most important macroeconomic statistics: Gross Domestic Product (GDP) The Consumer Price Index (CPI) The unemployment rate
slide 3 CHAPTER 2 The Data of Macroeconomics Gross Domestic Product:   Expenditure and Income Two definitions: Total expenditure on domestically-produced final goods and services. Total income earned by domestically-located factors of production. Expenditure equals income because every dollar spent by a buyer becomes income to the seller. Expenditure equals income because every dollar spent by a buyer becomes income to the seller.

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slide 4 CHAPTER 2 The Data of Macroeconomics The Circular Flow Households Firms Goods Labor Expenditure (\$) Income (\$)
slide 5 CHAPTER 2 The Data of Macroeconomics Value added definition: A firm’s value added is the value of its output minus the value of the intermediate goods the firm used to produce that output.

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slide 6 CHAPTER 2 The Data of Macroeconomics Exercise:    (Problem 2, p. 40) A farmer grows a bushel of wheat and sells it to a miller for \$1.00. The miller turns the wheat into flour and sells it to a baker for \$3.00. The baker uses the flour to make a loaf of bread and sells it to an engineer for \$6.00. The engineer eats the bread. Compute & compare value added at each stage of production and GDP
slide 7 CHAPTER 2 The Data of Macroeconomics Final goods, value added, and GDP GDP = value of final goods produced = sum of value added at all stages of production. The value of the final goods already includes the value of the intermediate goods, so including intermediate and final goods in GDP would be double-counting.

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slide 8 CHAPTER 2 The Data of Macroeconomics The expenditure components of  GDP consumption investment government spending net exports
slide 9 CHAPTER 2 The Data of Macroeconomics Consumption (C) durable goods last a long time ex: cars, home appliances nondurable goods last a short time ex: food, clothing services work done for consumers ex: dry cleaning, air travel. definition: The value of all goods and services bought by households. Includes:

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slide 10 CHAPTER 2 The Data of Macroeconomics U.S. consumption, 2006 41.4 20.5 8.1 70.0% 5,483.7 2,714.9 1,070.3 \$9,268.9 Services Nondurables Durables Consumption % of GDP \$ billions
slide 11 CHAPTER 2 The Data of Macroeconomics Investment (I) Definition 1: Spending on [the factor of production] capital. Definition 2: Spending on goods bought for future use Includes: business fixed investment Spending on plant and equipment that firms will use to produce other goods & services.

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Chapter2 - Chapter2 The Data of Macroeconomics CHAPTER 2...

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