Economics 1B Lecture 8 S2011

Economics 1B Lecture 8 S2011 - 4/27/2011 Economics 1B UC...

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4/27/2011 1 Economics 1B UC Davis Professor Siegler Spring 2011 Midterm #1 Scores 50 Se es EXAM1 10 20 30 40 Series: EXAM1 Sample 1 324 Observations 324 Mean 71.70679 Median 73.00000 Maximum 96.00000 Minimum 30.00000 Std. Dev. 11.37119 Skewness -0.675577 Kurtosis 3.659026 2 0 30 40 50 60 70 80 90 Jarque-Bera 30.50908 Probability 0.000000
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4/27/2011 2 I. Definition of Nominal GDP y Nominal Gross Domestic Product is the value of all final goods and services newly produced in a country during a given period of time, usually a quarter or a year. y Nominal GDP is not adjusted for inflation, while real GDP is (Thursday). y Let’s look at the components of the definition above one by one. 3 I. Definition of Nominal GDP y Value? y For most goods and services which are purchased in For most goods and services, which are purchased in markets, value for a product is determined by the market price multiplied by the quantity produced. y Public sector output is measured based on inputs and not on outputs. y Many non market activities are excluded, but shouldn’t be, such as household production, the underground economy, and the value of leisure. y “Bads” as well as “goods” are counted. Costs of housing 2 million prisoners, medical expenses related to obesity, cancer treatments related to smoking, expenditures on divorce, oil spill cleanups, commuting expenses, etc. all increase measured GDP. 4
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4/27/2011 3 I. Definition of Nominal GDP y Final Goods and Services? y A final good or service is one purchased by the final or ultimate user. y A particular good may be a final good in one instance (if I buy new tires for my car), but an intermediate good in another instance (if Ford buys new tires to put on one of their newly produced cars) on one of their newly produced cars). y Intermediate goods (and services) are excluded to avoid double counting. 5 I. Definition of Nominal GDP y Newly Produced? y It matters when the final good or service is produced, not when it is purchased. y To account for this, the national income and product accounts includes a category called “inventory investment.” For example, if Ford produces a car in 2010 but it is not sold until 2011 at the end of 2010 2010, but it is not sold until 2011, at the end of 2010, the car is treated as if Ford purchased the car for itself. 6
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4/27/2011 4 I. Definition of Nominal GDP y In a Country? y If the good or service was produced in the United States, regardless of who produced it, it counts toward U.S. GDP. y Differences between GDP and GNP (Gross National Product). 7 I. Definition of Nominal GDP y During a Given Period of Time?
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This note was uploaded on 02/07/2012 for the course ECON 1b taught by Professor Sheffrin during the Spring '07 term at UC Davis.

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Economics 1B Lecture 8 S2011 - 4/27/2011 Economics 1B UC...

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