29 January 2013 Econ 202

# Government g spending by all levels of government on

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Government (G): Spending by all levels of government on final goods and  services o \$3,060 (billions of dollars) Net Exports (NX): Exports minus imports o (\$568) (billions of dollars) o We import more than we export Total GDP is \$15,076 (billions of dollars) Real vs. nominal GDP

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GDP is market values  GDP  =   (p x q) Σ Nominal GDP = GDP in current dollars o Raw GDP data, unadjusted for price changes Real GDP = GDP adjusted for changes in the overall price level o GDP in “constant dollars” Notation o Y = real GDP o P =  price  level  o PY = nominal GDP Growth Rates Growth rate of X = % Δ X Growth rate of X = (Change in X)/(Starting X) Growth rate of X = (X1 – X0)/X0 Example o GDP at end of 2010 = \$14,499 o GDP at end of 2011 = \$15,076 o p of 2011 = (15,076 – 14,499)/14,499 = 577/14,499 =0.0398 = 3.98% Prices from 2005 are used in America as the base year for computing real  GDP Increases in the nominal GDP of the past six years has primarily been from  prices going up Computing Real GDP Divide to filter out old prices Multiply to put in new Real GDP t  = (Nominal GDP t )/(Price level t ) x 100 For 2011 Real GDP = (15,076)/(113.4) x 100 = 13,294.5 Now, we can compute 2011 real GDP growth rate o Convert 2010 nominal GDP to 2011 dollars (14,499)/(111) x 100 = 14,812 o Compute the growth rate (15,076 -14,812)/14,812 = 1.78% Shortcomings of GDP
03/06/2013 13:57:00

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03/06/2013 13:57:00
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