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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