Lectures_Outline_Chpt2

S labor income 64 capital income 29 indirect taxes

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Unformatted text preview: y during a given period – In U.S.: Labor Income (≈64%), Capital Income (≈29%), Indirect Taxes (≈7%) An Example Firm 1: Oranges Firm II: Orange Juice Sales Revenue $50 Sales Revenue Expenses $40 Expenses Wages $40 $100 $80 $10 $30 Orange Purchases Profit Wages $50 Profit I. Value of final goods II. Sum of value added (sales.revenues – value.of.intermediate goods) III. Sum of Income $20 Nominal GDP vs. Real GDP • Nominal GDP ($Yt) is the sum of quantities of final goods produced times their current prices. • If nominal GDP increases, it could be because – Increase in production – Increase in prices • How do we find out the growth of output? EXAMPLE: Pizza year 2002 2003 2004 P $10 $11 $12 Latte Q 400 500 600 P $2.00 $2.50 $3.00 Compute nominal GDP in each year: Increase: 2002: $10 x 400 + $2 x 1000 = $6,000 2003: $11 x 500 + $2.50 x 1100 = $8,250 2004: $12 x 600 + $3 x 1200 Q 1000 1100 1200 = $10,800 37.5% 30.9% Nominal GDP vs. Real GDP • Real GDP (Yt): computed with constant prices...
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This note was uploaded on 02/06/2014 for the course ECON 110A taught by Professor Staff during the Spring '08 term at UCSD.

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