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Unformatted text preview: Social Analysis 10 Notes – Macroeconomics Benjamin Massenburg Fall 2007 Unit 1 ! GDP : Gross Domestic Product: measures total income, expenditure, and the aggregate production of goods and services in the economy, ! " # $ % $ & $ ’( o The market value of all final goods and services produced within a country’s given time period ! Only final goods and services to avoid double counting ! Market Value : if it actually has a value in the market, whether the market is paying to keep them in the market or not. ! Produced : do not take into account what is already existing, like stocks, bonds, old homes o Consumption : spending by the households on goods and services, with the exception of purchases of new housing o Investment : spending on capital equipment, inventories, and structures, including purchases of new housing o Government Expenditure : spending on goods and services by local, state, and federal governments o Net Exports : income from domestically produced goods purchased by foreigners ( exports ), minus spending on foreign goods by domestic residents ( imports ) ! Imports : decrease the GDP, because your are paying other economies for their goods ! Exports : increase the GDP, because other economies are paying for your goods o Nominal GDP : aggregate of )*+,- . /0123+34 for every good in the entire economy, valued at current prices o Real GDP : The value of goods and services measured at a constant price level, ( adjusted for inflation ) ! The constant price level is set, and is multiplied by the current quantity of goods consumed. o GDP Deflator : 56789:; =>? @A:; =>? . BCC determines changes in the market that have happened since the time of the constant price level ! Consumer Price Index: CPI : a measure of the overall cost of the goods and services bought by a typical consumer, used for a given bucket of goods where ,DE3 " ) F / , and since Q is constant, we measure G P o Take the aggregate of the HIJKL MN LOKP QMMR . STOUVJW OXOJYOZYL MN LOKP QMMR o And [H\ " ]6^_ 6‘ ]abbA9_ cA:b ]6^_ 6‘ d:^A cA:b . BCC ! Determines changes in prices o Inflation : too much money chasing after too few goods, Friedman o Inflation Rate : percentage change in the CPI from the preceding period. (or calculated by GDP Deflator) ! %2ef13+D2 g13- " hij klmmnop qnrm shij tmnuvwlx qnrm hij tmnuvwlx qnrm o CPI vs. GDP Deflator: ! GDP Deflator only reflects prices of goods and services produced domestically, while the CPI reflects that of all goods bought by consumers ! Producer Price Index: PPI : a measure of the overall cost of the goods and services bought by a typical firm ! Indexation : the automatic correction of a dollar amount for the effects of inflation by law or contract o For Example: when the CPI increases a firm could offer its workers a larger Cost of Living Allowance ! Nominal Interest Rate : the interest rate as usually reported without a correction for the effects of inflation ! Real Interest Rate : the interest rate corrected for the effects of inflation...
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This note was uploaded on 04/05/2012 for the course ECON 1010b taught by Professor Christopherfoote during the Spring '12 term at Harvard.
- Spring '12