Produced in a nation during a period of 1 year a

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produced in a nation during a period of 1 year a. Goods COUNTED- New goods and Final goods b. Goods NOT counted- Intermediate goods produced to manufacture a final good 16. Basic Circular Flow- (Closed economy) markets decide “what” “how” “who” a. Assumptions: a.i. House Holds supply factors of production a.ii. House Holds spend everything they earn on goods/services a.iii. Firms spend all of their revenues on resources b. Leakages: b.i. Saving b.ii. Taxes b.iii. Imports c. Injections: c.i. Business Investment (I) c.ii. Firms buy new buildings, machines, etc c.iii. Gov’t Expendatures (G) c.iv. Foreign Purchases of US Exports 17. Expendature Approach GDP- add up all expendatures on final goods + services by house holds (C) + Firms (I) + gov’t (G) and foreigns (x-m) a. C= Consumption b. X=Exports c. M=Imports d. GDP= C + I + G + (X-M) e. NX= Negative exports (neg% of GDP) 18. Consumption Spending is near 70.5% of GDP 19. Rise in stocks/home value INCREASE spending. Decrease in stocks/home value decrease spend
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20. Income Approach GDP- add up all the incomes earned in the exchange for the factors of production. a. Wages + Interest Payments + Rent + Profits + Indirect Business Taxes= National Income (NI) + Depreciation = GDP b. NI DOESN’T equal GDP c. Depreciation- firms set aside funds to repair/replace worn out capital goods used
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  • Fall '10
  • staff
  • Economics, Opportunity Cost, gross domestic product, Income Approach GDP, Nominal GDP- ________________________________________________, GDP Deflator- NOMINAL

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