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Econ 104, Week 4 notes (Feb 16 & 18)

by: Bailee Gustafson

Econ 104, Week 4 notes (Feb 16 & 18) Econ 104

Marketplace > University of Wisconsin - Milwaukee > Economcs > Econ 104 > Econ 104 Week 4 notes Feb 16 18
Bailee Gustafson
Principles of Macroeconomics
Dr. Mohsen Bahmani-Oskooee

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About this Document

These notes cover what we have gone over in class and what will presumably be on the exam.
Principles of Macroeconomics
Dr. Mohsen Bahmani-Oskooee
Class Notes
Econ, Macroeconomics
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This 0 page Class Notes was uploaded by Bailee Gustafson on Thursday February 18, 2016. The Class Notes belongs to Econ 104 at University of Wisconsin - Milwaukee taught by Dr. Mohsen Bahmani-Oskooee in Winter 2016. Since its upload, it has received 16 views. For similar materials see Principles of Macroeconomics in Economcs at University of Wisconsin - Milwaukee.


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Date Created: 02/18/16
Notes from Feb 16 amp Feb 18 Lecture How to Measure Total Output amp In ation 0 Gross Domestic Product GDP The sum of dollar value of all the nal goods and services produced in an economy over a certain period of time EXAMPL 2013 2014 2015 2016 E P13 P14 P15 P16 013 014 015 016 Good 1 10 12 10 8 10 10 11 11 Good 2 5 7 5 8 5 5 5 5 Good 3 3 4 3 5 20 20 25 17 Nominal GDP 185 235 210 213 GDP for 2013 1010 55 320 185 3 Methods to Measure GDP 0 Method 1 GDP as a Sum of Values Added Contribution of a rm to GDP Expenses Production Sales Purchases from other Sales to Business 1050 820 Firms wages 846 Sales to Consumers 825 Contribution to social Sales to Government 125 insurance 27 Rent 12 Change in Inventories 100 Interest 8 X Sales Tax 30 X Depreciation 60 X Pro t 297 X Total 2100 Total 2100 a Contribution of a rm to GDP 2100820 bValue Added Sales Change in Inventory Firm purchases c GDP Sum of Values Added in Economy by all Firms EX Assume a simple economy produces only one loaf of bread per day that s sold for 300 Firm Value Added Farmer sold wheat to a miller 120 for 120 Miller sold our to a baker for 080 200 Baker sold bread to a store for 050 250 Store sold bread to me 300 050 GDP 300 0 Method 2 Expenditure Approach to Measure GDP DVOWU39lbUUNH Durable goods for households Nondurable goods for households Services for households Housing construction Machinery tools for rms Change in inventories Government purchase of goods amp services Net Exports 13 will be categorized under the letter C 46 will be categorized under the letter I investments 7 will be categorized under the letter G Exports X GDP C I G X IM lmportslM Method 3 Income Approach U39lbUUNH OOIO Wages etc Net Interest Rental Income Proprietor s Income Corporate Pro ts a Taxes b Dividends c Undistributed Indirect Business Taxes minus Subsidies Depreciation Income paid to other countries Less Income received from other countries Other Concepts of Income GDP income received from other countries Income paid to other countries GNP GNP Depreciation NNP a Gross Investment Depreciation Net Investment 3 NNP Indirect Business Taxed NI 4 NI Income earned but not received Income not earned but received PI personal income 5 PI Personal Income Taxes DI disposable income 6 DI C consumption S savings How to Measure In ation 2015 2016 P15 P16 015 016 Good 1 10 20 10 2 Good 2 2 3 100 110 Good 3 20 25 6 6 Good 4 1000 2000 0 0 0 Method 1 a increase in price of good 1 100 b increase in price of good 2 50 c increase in price of good 3 25 d increase in price of good 4 100 On the Average 100 50 25 100 6875 4 Problem this method is wrong because it is does not take into consideration the importance of goods we consume 0 Method 2 We try to take into account the importance of goods by including quantities in the previous table multiply P and Q 2 P15 Q15 420 2 P16 Q16 520 By what percent is 520 greater than 420 520 420 238 420 0 Method 3 In this method we re taking into account of the problems identi ed under method 1 amp 2 that is a the importance of goods by including quantities b x consumption of goods such that any change in the cost of basket goods 2 P15 015 420 2 P16 016 650 It didn t go up because there s more consumption but because the price changes By what percent is 650 greater than 420 650 420 420


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