Econ Final Review

Econ Final Review - ECON 318 Final Exam Review Fall 2011...

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ECON 318 Final Exam Review Fall 2011 Sport Industry Delivery 1. Understand how to measure the Gross Domestic Product and its various components. C, I, G, NX component is calculated. a. The total value of the output of (all final goods and services) produced in the nation during a single year. b. Four Components of GDP 1. Personal consumption expenditures (C) Are household expenditures on goods and services produced by firms, such as beverages, exercise and sport shoes, athletic club memberships, and bikes. Exclude purchases of households on real property Are the largest and are a relatively stable component of GDP 2. Gross private domestic investments (I) Expenditures of business firms on purchasing new capital equipment, newly produced physical structures, and inventories. Money that individual households spend on acquisition of new residential houses Analyzes two basic items: a. Net Private Domestic Investment – is the part of gross investment that adds to the existing stock of physical structure and equipment b. Consumption of fixed capital – consist of depreciation and an allowance for accident damage to the physical structures and equipment 3. Government purchase of goods and services (G) Calculates the goods and services purchased by all levels of government, from the federal government to local municipalities. May include the costs and expenditures of providing services and law enforcement. 2 nd largest component of GCP 4. Net exports of goods and services (NX) Difference between the value of exports of goods and services and the value of imports of goods and services is the Net exports of goods and services. Exports are the goods and services produced in a country but purchased by foreigners. Have always been a negative component of GDP

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a. Example: Americans have imported more goods from other nations then they sold to the rest of the world. 5. Equation: GDP= C + I + G + NX c. When calculating GDP, the value of intermediate goods and services, and goods purchased for resale of for use in producing other goods should not be included. d. Only final goods and serviced produced count toward GDP. 2. Understand how to measure the Gross Domestic Product from the Income approach and its various components. CE, RI, CP, NI and PI component is calculated. a. Measures GDP or the value of production by adding together all of the incomes paid by firms to households for the services of the factors of production that they use, including labor hired, interest paid for borrowed capital, rent paid for land use, and profit. b. Factor incomes are split into five components:
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This note was uploaded on 12/18/2011 for the course ECO 202 taught by Professor Normmiller during the Fall '08 term at Miami University.

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Econ Final Review - ECON 318 Final Exam Review Fall 2011...

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