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slide_2 - The Data of Macroeconomics(Chapter 2 Be familiar...

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The Data of Macroeconomics (Chapter 2) January 22, 2012
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° Be familiar with important measures of economic performance ° Key macroeconomic variables (and notations) ° Real GDP ( Y ), Price Index ( P ) ! Nominal GDP ( PY ) ° Consumption ( C ), Investment ( I ), Government Purchases ( G ), Net Exports ( NX ) ° Capital ( K ) and Labor ( L ) ° In°ation ( ° ) ° Unemployment rate ( u ) ° An important concept: Real vs. Nominal variables
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Gross Domestic Product (GDP) ° Bureau of Economic Analysis collects data of various measures of aggregate economic activity. ° GDP is most widely used measure of economic activity (measure of total output) ° De±nition: The GDP is de±ned as the market value of newly produced ±nal goods and services.
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Three di/erent ways of measuring GDP 1. GDP by production: Add together the value of production in all di/erent industries 2. GDP by expenditure: Add together the spending on goods and services 3. GDP by income: Add together all the incomes that is generated from the production process For the economy as a whole, total production (output) = total expenditure = total income Macroeconomists often use "output" and "income" interchangeably.
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total production = total expenditure = total income (Example) consider a simple economy that produces apples only Three players: farm owner : produces apples, employs labor, borrows capital (machines) capital owner : lends capital, receives capital income worker : provide labor services, receives labor income
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Total production : The economy produced 100 apples in 2011.
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