Chapter_5 econ - Getting Started Measuring economic...

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Unformatted text preview: Getting Started Measuring economic activity is an essential first step to assess and solve economic concerns Many countries struggle with low or highly variable growth rates of output or with high unemployment rates Argentina, for example, has suffered with dramatic changes in output growth rates and with very high unemployment rates GDP Growth Rates in Argentina 1996 2004 Unemployment Rates in Argentina 1995-2002 Measuring Output Gross domestic product - GDP The market value of the final goods and services produced in a country during a given period Using market values of different goods and services allows economists to aggregate the quantities of many different goods and services Using market values allows the adding of apple output to banana output to steel output Measuring Output Market Value A convenient way to add together or aggregate many different goods. But not all valuable goods and services are bought and sold in markets For example, unpaid work of a homemaker is not sold in markets, but paid housekeeping and child care services are sold in markets Pitfalls can be created if changes lead to more or less of output sold in markets Output of government is counted although it may not go through a market Measuring Output Final good or service A good or service that is produced for its final user and not as a component of another good or service Intermediate good or service A good or service that is produced by one firm, bought by another firm, and used as a component of a final good or service Measuring Output Final goods or services Goods or services consumed by the ultimate user The end products of the production process Counted as part of GDP Intermediate goods or services Goods or services used up in the production of final goods and services They are counted indirectly since their value is already included in the final product value If the intermediate good is not currently produced then its value must be subtracted from the final product value to avoid double-counting the intermediate good Measuring Output Suppose, in 1999, steel output is $100,000 and auto companies buy $60,000 of steel, but produce no cars. In 2000, assume steel output is $0 and auto companies use $50,000 of steel to produce $300,000 of autos. How much is GDP for each year? For 1999, all of the steel is added to inventories and is a final good. GDP is $100,000....
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This note was uploaded on 04/07/2008 for the course ECON 201 taught by Professor C.liedholm during the Fall '07 term at Michigan State University.

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Chapter_5 econ - Getting Started Measuring economic...

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