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CH 6 - CH 6 1 Bread Wage(If not stated it is always...

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CH. 6 1. Bread Wage (If not stated it is always nominal)= $5/hour Price of bread= $1 Real wage= nominal wage/price= 5/1 = 5 is the amount of bread that the worker can buy a) Increase 10% in wage and increase 20% in price, is the worker better off? -Real wage=5.50/1.20= 4.58 (Number of loaves he can buy) < 5 -Worker is worse off b) Increase 10% in wage, what price do you need so that the worker is better off? -P= Decreases, Stays the same, or increases by less than 10% c) Increase 10% in wage, how much does price increase so the worker can buy the same as before? -Price increases by 10% GDP (Output) -Total value of all final goods and services produced for the market place during some period of time within the nation’s border. 1. Total value: Add oranges and apples (Values of). Caveat: GDP increases as prices increases even when production stays the same--- (to counteract this phenomenon you can use REAL GDP – adjusted for inflation) 2. All final goods and services: Excludes intermediate goods 3. Produced: Excludes land, property, used goods, and financial assets. 4. Market place: Pay someone to walk dog this would be included in GDP, while if you walk the dog yourself then this is NOT included in GDP. 5. During some period of time: GDP is a FLOW variable 6. Within the nation’s border: -European company producing in the US Included -American company producing in the UK NOT included -To Calculate Nominal GDP : you times the amount of production of a good to the price of the good and you add it to the price times the quantity produced of another good. -To Calculate Real GDP : DO the same calculations (times production by price), but keep price the same to one specific year for both production numbers. I.E. times both 2010 and 2011 amount of a good produced to the prices in 2010.
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