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ECO3041 - Ch 2 - US Economy

ECO3041 - Ch 2 - US Economy - Chapter 2 The US Economy I...

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Chapter 2 The US Economy I. What America produces How much output GDP is the gross domestic product of a nation. Defined as the total value of final goods and services produced within a nations border’s in a given period of time Real GDP is the inflation-adjusted value of GDP: it is the value of output measured in constant prices. Per capital GDP is the total GDP divided by total population. The per capital GDP is simply an indicator of how much output each person would get if all output were divided evenly among the population. Historical comparisons : The idea is for economist to determine if we are living better or worse than yester years. Economic growth is an increase in output (real GDP). Mathematically it can be defined as an expansion in the production possibility frontier. Social welfare: Although the US has claim to being the world’s largest economy, we must not confuse GDP as a broad measure of social welfare. 1. it only accounts for finished products 2. home products are not included 3. there is always statistical error The mix of output The major uses of total output include: household consumption business investment government purchasing exports 1
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Consumer goods: Consumer goods are divided into two: durable non durable They behave different in the business cycle Investment goods: Investment is expenditure on new plants and equipment in a given period of time, plus the changes in business inventory.
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