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. s 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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This note was uploaded on 04/07/2008 for the course ECON 252 taught by Professor Robertholand during the Fall '08 term at Purdue.

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