Chapter2LectureNotesSAK

Chapter2LectureNotesSAK - GDP Real vs Nominal Prices...

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Unformatted text preview: GDP Real vs Nominal Prices Employment Intermediate Macroeconomics, 321 Chapter 2 Data Instructor Geoffrey Williams Rutgers University May 19, 2009 Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Outline 1 GDP Rules Components Income 2 Real vs Nominal Prices GDP Deflator Consumer Price Index Comparing CPI vs GDP Deflator 3 Employment How Is Data Gathered? Definitions Patterns Data Issues Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Main Data Concepts 1 Gross Domestic Product (GDP) - National income and expenditure 2 Consumer Price Index (CPI) - Price levels 3 Unemployment rate Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income Two Sides of GDP Total income of everybody in the economy Total expenditure on the economys output of goods and services We can see that these are two sides of the same coin we each have income of some kind, which we then spend on goods and services (where it then becomes somebody elses income, and so on and so on.) Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income How would YOU track GDP? Lets take a moment to think through how to approach this question. First off, whats a simple model of the economy? What are the entities that make up the economy? What are the flows between them? Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income A Simple Model of the Economy Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income Problems How about used goods ? How about excess production and inventories ? Intermediate goods (i.e., goods that one company buys from another to use as part of its production) Hard to value services government services, or existing housing Production that never goes to market publicly like homemade meals or blackmarket sales? Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income Used Goods The sale and purchase of used goods are left off of income and expenditure there is no new production Most of eBay does not show up in GDP Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income Inventories Excess production that gets written off (spoiled bread) is simply ignored Excess production that goes into inventory is counted as expenditure (by the firm) Inventory that is sold is ignored (just like eBay) Instructor Geoffrey Williams Chapter 2 GDP Real vs Nominal Prices Employment Rules Components Income Hard to value goods The existing stock of housing is incorporated into GDP by calculating an imputed rental value Similarly, government services are valued using an imputed value which is simply their cost Homemade meals and blackmarket deals are simplyignored....
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This note was uploaded on 02/29/2012 for the course 320 322 taught by Professor Macro-williams,micro-yoshi during the Fall '10 term at Rutgers.

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Chapter2LectureNotesSAK - GDP Real vs Nominal Prices...

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