econlecture3notes - (super equal sign “must be equal”...

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9/7/11 GDP GDP – key words nominal GDP – GDP measured in current dollars money value – (roughly) price X output final output • goods and services purchases by final or ultimate users • ignores purchases of intermediate goods to avoid double-counting (and getting too high of a GDP estimate) all goods and services – virtually everything traded/sold on markets domestic output – output produced within US geographic borders period of time – produced over a period of time, such as a quarter or a year what investment does not include: financial investments (ex: purchasing stocks/bonds) purchases or sales of existing or used houses question: Why measure GDP by the expenditure on final output of goods and services? satisfies an important accounting principle data collection procedures
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Unformatted text preview: (super equal sign “must be equal”) inventory accumulation is possible because of an accumulation of inventory of the years can sell more than produced in one year; counted as part of expenditure capital = not financial; real goods question: Why measure GDP by the incomes earned by the factors of production? satisfies an important accounting principle data collection procedures are possible *basic GDP identity *actual vs. planned magnitudes see next week disadvantage of nominal GDP: changes in nominal GDP pick up BOTH changes in prices and changes in output (whereas we want to separate the two) calculating real GDP – keep constant by using only base year prices to calculate GDP changes in real GDP pick up only changes in output...
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