Chp. 5 Measuring a Nation's Income

# Chp. 5 Measuring a Nation's Income - current prices ○...

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It is the market value of all FINAL goods and services produced within a country in a given period. = C + I + G + EX -IM GDP = Consumption + Investment + Government Spending + Exports -Imports Ex. You spend \$15 on a new CD. This represents an expenditure of goods and services of \$15, but also represents \$15 income to the store. square4 GDP measures the value of final output produced within a country in a given period. Goods and services produced in the United States by foreign companies are included in the computation of GDP, but those produced by US firms overseas are not. • Gross domestic product (GDP) measures both the total income earned by factors of production in an economy and the total expenditure on goods and services produced in an economy. • The larger the Gross Domestic Product, the more a country can afford to spend on education and health care. • Intermediate Goods -inputs into the production of a final good. • GDP per person = GDP/Population • Nominal GDP -the production of goods and services valued at
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Unformatted text preview: current prices ○ Uses prices of a base year • Real GDP- the production of goods and services valued at constant prices • The base year is the only year where the Nominal GDP and Real GDP are equal = (End GDP - Beg. GDP) / Beg. GDP The growth rate in real GDP is the % change in real GDP • • Net Exports is the value of exports minus the value of imports. • The purchase of stocks and bonds is not considered an investment ○ Buying a house is considered an investment, not a consumption. • Investment is the purchase of plant and machinery to be used in the production of additional goods and services. Real GDP GDP deflator = Nominal GDP x 100 • GDP Deflator- a measure of the price of level calculated as the ratio of nominal GDP to real GDP x 100 • Inflation Rate = % change in the GDP deflator • Increases in inventory is Included in GDP Leisure time is not calculated In GDP Chp. 5 Measuring a Nation's Income Exam 2 Material Page 1...
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