CHAPTER 6 OF MACROECONOMICS
CHAPTER 6 OF MACROECONOMICS 2105 025
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This page Class Notes was uploaded by Christina Smith on Sunday January 24, 2016. The Class Notes belongs to 2105 025 at Georgia State University taught by Mr. Apperson in Winter 2016. Since its upload, it has received 69 views. For similar materials see Macroeconomics in Economcs at Georgia State University.
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Date Created: 01/24/16
CHAPTER 6 VOCABULARY amp NOTES Macroeconomics The study of the economy of the entire nation or society Determines what happens with the output of goods and services as they rise and fall Microeconomics The behavior of individual people rms and industries 0 Determine people s decisions and how rms can compete with competitors GDP Gross Domestic Product 0 Measures Living Standards Ability to have life s bare necessities as well as education 0 Measures Economic Growth 0 Measures Business Cycles 0 The market value of all FINAL goods and services produced within a nation during a speci c period of time 0 Measures a nation s income and output 0 The sum of at businesses that produce goods 0 Money received for services is included in GDP and calculated using market values WHY MEASURE GDP To nd Living Standards Growth How is it going to be 10 years from now Track shortrun business cycles WNH Per Capita GDP per person GDP divided by population 0 Average living standards in a nation Per Capita GDP 0 GDP per person 0 Dividing the countries GDP by its population Real Capita GDP 0 Generally looking at data over time 0 May not always be the best standard to compare countries 0 Doesn t adjust for population size of country Real GDP 0 Adjusted for changes in prices Anytime GDP is evaluated over time we have to use real GDP so that we can nd in ation Measure of the value of economic output adjusted for price changes Nominal GDP 0 GDP measured in current prices and not adjusted for in ation 0 All GOODS and SERVICES Price Level 0 An index to measure prices of goods and services throughout an economy GDP De ator A measure if the price level that includes prices if the nal goods and services included in gross domestic product Economic Growth o Is measured as the percentage change in real per capita GDP 0 Not automatic or even typical 0 Primary topic that macroeconomists study ln a on o The growth in the overall level of prices in an economy 0 Causes GDP to go up even if there is no change in the quantity of the country s goods and services 0 We have to adjust GDP based on the effects of in ation Economic Growth o Is measured as the percent age change in real per capita GDP Recessions 0 Short term economic downturns usually last 6 to 8 months 0 Income levels fall 0 Individuals loose theirjobs and can t nd work Great Recession Lasts for about 19 months 0 In 2008 the real GDP fell by almost 9 Business Cycle 0 Short run uctuations in economic activity o On a Graph the straight lone represents the longterm trend of GDP 0 The slope of the line is the longterm growth of real GDP 0 The peaks and troughs divide the business cycle into two phases EXPANSION and CONTRACTION Economic Expansions Peaks 0 When the economy is growing faster than usual 0 Economy can also be shrinking Economic Contraction downward to trough 0 When the economy is growing at a slower rate than usual Services 0 Outputs that provide bene ts without the production of a tangible product 0 Intangible Is not stored and does not result in ownership 0 EX Eating at a restaurant Intermediate Goods Goods that rms can repackage or bundle with other goods for sale at a later stage Used in the eventual production of a final good AVOID DOUBLE COUNTING INTERMEDIATE GOODS We only count the FINAL product EX Don t count a resold used car don t count a house that has been resold Final Good 0 Good sold to nal users and customers Durable Goods use over multiple years Buying computers NonDurable Goods EX Coke a product that you can use in one sitting Gross National Product 0 An alternative measure of national output that has been used in the past Output produced by workers and resources owned by residents od the nation 0 An alternative measure of national output Bureau of Economic Analysis Categories Consumption and Investment Consumption o The purchase of nal goods and services by households with the exception of new housing Nondurable and durable EX Restaurant Meals Services Private Schools because it is being funded by the people Investment 0 Private spending on tools plant and equipment used to produce future output EX Greenhouses Buying Homes Government Spending Includes spending by all levels of government on nal goods and services NetExpo s EXPORTS minus IMPORTS of FINAL goods and services 0 Exports Strawberries grown in another country and brought into ours 0 Imports Import and Consumption EX Someone buying a coke in Honduras This doesn t re ect the productivity of that country because it wasn t produced there Quantity Price Market Value REAL GDP NOMINAL GDP PRICE LEVEL X BASE YEAR PRICE LEVEL GDP DEFLATOR NOMINAL GDP REAL GDP X100 GDP CONSUMPTION INVESTMENT GOVERNMENTEXPORTS IMPORTS GROWTH RATE CHANGE IN REAL GDP ENDINGBEGINNING BEGINNING X100 HOW TO CONVERT NOMINAL GDP TO REAL GDP REAL GDP GDP PRICE LEVEL X100 PRICE LEVEL PRICE IN YEAR X PRICE IN BASE YEAR X100
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