Economics_Ch11

# A tiny economy has two goods a and b it produces 100

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Unformatted text preview: ic product \$200,000 \$1,000 \$221,000 This total, \$221,000, is the gross domestic product, or GDP, of the tiny economy. A tiny economy has two goods, A and B. It produces 100 units of A and 200 units of B this year. The price of A is EXAMPLE: 11 (286-309) EMC Chap 11 EXH I BIT 11/17/05 11-1 6:05 PM Page 289 Gross Gross Domestic Product (GDP) Product (GDP) 10 computers 10 cars + 10 watches + = G DP \$221,000 at \$2,000 each equals \$20,000 at \$20,000 each equals \$200,000 \$4 and the price of B is \$6. It follows that its GDP is \$1,600. We got this dollar figure by finding the market value of A (\$4 100 units \$400), the market value of B (\$6 200 units \$1,200), and then adding the two values. Why Count Only Final Goods? The definition of GDP specifies “final goods and services”; GDP is the total market value of all final goods and services produced annually in a country. Economists often distinguish between a final good and an intermediate good. A final good is a good sold to its final user. When you buy a hamburger at a fastfood restaurant, for example...
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