Net spending by foreign sector net exports of goods

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Net Spending by foreign sector – net exports of goods and services (NX = X – M) Government consumption expenditures and gross investment – include e.g. defense expenditures
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Calculating its Value – Three Approaches Income Approach – adding up production- related domestic incomes (wages, rents, profits) earned by all individuals and organizations Closed vs. open economy Need to taken into account - Net income from RoW : to be deducted - Depreciation: consumption of fixed capital – to be added GDP = NI – Net income from RoW + Depreciation
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Growth, Price Changes and Real GDP GDP Growth – changes in GDP over time, percentage change in the value of GDP from one year to another. Percentage change = [(Value2- Value1)/Value1]*100 Annual growth and quarterly growth
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Growth, Price Changes and Real GDP Nominal vs. Real GDP Nominal GDP – total production valued at current prices (current meaning the year in consideration) !! Not only the level of output but also the price levels change from one year to another. Real GDP – Actual value of goods and services produced which is net of price changes GDP = Σ (P x Q)
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Growth, Price Changes and Real GDP Calculate Real GDP using constant prices from a base year/reference year
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