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Measuring the Econom7 - Measuring the Economy Computing GDP...

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Measuring the Economy Computing GDP Now that we have an idea of what GDP is, let's go over how to compute it. We know that in an economy, GDP is the monetary value of all final goods and services produced. For example, let's say Country B only produces bananas and backrubs. Figure %: Goods and Services Produced in Country B In year 1 they produce 5 bananas that are worth $1 each and 5 backrubs that are worth $6 each. The GDP for the country in this year equals (quantity of bananas X price of bananas) + (quantity of backrubs X price of backrubs) or (5 X $1) + (5 X $6) = $35. As more goods and services are produced, the equation lengthens. In general, GDP = (quantity of A X price of A) + (quantity of B X price of B) + (quantity of whatever X price of whatever) for every good and service produced within the country. In the real world, the market values of many goods and services must be calculated to determine GDP. While the total output of GDP is important, the breakdown of this output into the large structures of the economy can often be just as important. In general, macroeconomists use a
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