Chapter+5+-+Gross+Domestic+Product

Chapter+5+-+Gross+Domestic+Product - Study Guide To...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Study Guide To Accompany Macroeconomics: Theory and Policy By B. Modjtahedit Prepared by T. J. McCarthy and B. Modjtahedi University of California, Davis
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
market value market value of all goods and services of all goods and services produced produced GDP is defined as the in a country during a certain period of time during a certain period of time by the factors of production by the factors of production located within that country located within that country except those produced by households for their own consumption Market value is used as the unit of measurement because expressing all production in dollars makes different goods and services meaningfully comparable. To find market value, we multiply the quantities by market prices and add them up. Don’t forget to include the value of services provided. GDP is a flow variable : You need a time frame to measure it. A stock variable , on the other hand, is a variable you can measure at a single point in time. Factors of production: Land Labor Capital Goods and services produced within the United States by Japanese production factors count in the U.S. GDP., but are excluded from Japanese GDP. To count in GDP, the good or service should be brought to the marketplace for sale. Any good produced in 2010 counts in 2010 GDP, regardless of whether sold or not, and if sold, whether used or not. Second-hand goods and existing assets (like land, stocks, or bonds) sold in 2010 don’t count in 2010 GDP because they are not produced in 2010. Definition of GDP
Background image of page 2
Only new production is counted toward GDP. Key Points ALL new production is counted toward GDP: 1. Final goods and services 2. Intermediate goods that are sold but not used 3. Goods that are produced but not sold (final or intermediate) 4. Finished portions of unfinished goods (final or intermediate) Three aspects of GDP: 1. Production (GDP is the market value of the output produced in a country) 2. Income (GDP is equal to the total income earned by all factors of production in a country; it is the sum of wages, rent, interest, and profits) 3. Expenditures (GDP is equal to the total amount of money spent on the goods and services produced in a country)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Two major versions of GDP 1. Nominal GDP (market value of production in a year is measured in that year’s prices) 2. Real GDP (market value of production in a year is measured in a base year’s prices) As market value is measured in a single base year’s prices, real GDP is adjusted for price differences between years (it reflects only production, not prices) Key Points
Background image of page 4
Key Points The GDP growth rate is expressed as a percentage change in real GDP from one year to the next
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Key Points The GDP deflator is a price index that expresses a year’s price level as a percentage of a base year’s price level; this is the same as the ratio of nominal GDP to real GDP, as these two numbers differ by the ratio of the current year’s prices to the base year’s prices
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 44

Chapter+5+-+Gross+Domestic+Product - Study Guide To...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online