EC 111 Chapter 10 Lecture Notes
EC 111 Chapter 10 Lecture Notes EC 111
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This 2 page Class Notes was uploaded by Conner Jones on Wednesday February 17, 2016. The Class Notes belongs to EC 111 at University of Alabama - Tuscaloosa taught by Zirlott in Spring 2015. Since its upload, it has received 41 views. For similar materials see Principles of Macroeconomics in Economcs at University of Alabama - Tuscaloosa.
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Date Created: 02/17/16
Macroeconomics Chapter 10 Notes Income and expenditure GDP (Gross domestic product)- the market value of all final goods and services produced within a country in a given period of time o Includes: tangible goods (bikes, movies, etc.) and intangible goods (services like concerts, cell phone service, house cleaning, etc.) o Does not include intermediate goods (goods used in production of other goods), Does not include resale of goods (used car, used textbook, etc.), does not include American companies producing goods outside of American borders o Things without market value are not included (stuff you do yourself) For economy as a whole, income equals expenditure Circular flow diagram Simple depiction of macro economy Illustrated GDP as spending, revenue, factor payments, and income Omits: government (taxes), financial system (funds and loans), and foreign sector (trades, and currencies) Components of GDP Consumption (C) o Total spending by households on goods and services Investment (I) o Total spending on goods that will be used in the future to produce more goods Capital equipment (machines, tools, technology) Structures (factories, offices) Inventories (goods produced but not yet sold) Houses (residential fixed investment) Government spending (G) o All spending on goods and services purchased by government at the federal, state, and local level o Does not include social security, food stamps, unemployment insurance, etc. Net exports (NX) o Exports-imports Equation for GDP – Y=C+I+G+NX Real v. nominal GDP Nominal GDP- values output using current prices, not corrected for inflation Real GDP- values output using prices of a base year, corrected for inflation GDP deflator – nominal GDP/real GDP X 100 (GDP deflator for base year is ALWAYS 100) Inflation rate – current year GDP deflator - previous year GDP deflator/previous year GDP deflator X 100 GDP and economic Well-Being Real GDP per capita is the main indicator of the average person’s standard of living, however it is not a perfect measure of well being GDP does not include: o Quality of the environment o Leisure time o Non market activity such as child care o Equitable distribution of income Having a large GDP enables a country to afford better schools, cleaner environments, health care, etc. Indicators that positively correlate wo GDP o Life expectancy o Literacy Internet usage and technology
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