EcO 2013, week 5 notes
EcO 2013, week 5 notes Eco2013
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This 3 page Class Notes was uploaded by Lauren Carstens on Friday February 19, 2016. The Class Notes belongs to Eco2013 at Florida State University taught by Joan Corey in Spring 2016. Since its upload, it has received 22 views. For similar materials see Principles of Macroeconomics in Economcs at Florida State University.
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Date Created: 02/19/16
Macroeconomics Chapter 7: Taking the Nation’s Economic Pulse Gross Domestic Product (GDP) Gross Domestic Product: The market value of all final goods and services produced within a country during a specific period (usually a year/annually) o Market Value: Goods are weighted according to the purchase price of the good and service The dollar is the common measure for the value of the good/service produced (convert everything into dollar amounts) Goods that are considered to be worth more add more to the GDP Total spending on all goods and services produced during the year is summed to obtain the annual GDP o Final Goods and services: goods and services purchased by their ultimate user Ultimate user: The last user Intermediate goods/services: Goods purchases for resale or for use in producing another good or service Ex: If you buy a loaf of bread and then use it for sandwiches that you will sell, only the price of the sandwiches goes into the GDP Avoid double counting: We don’t count intermediate goods because their value is contained within a final good If you double count, you are overstating what GDP actually is Ex: Making bread Ex: Are tires an intermediate good or a final good o Could be both Intermediate if being used for cars; final good if used as a tire swing o Production: Only goods and services that are produced are included in GDP, transfers are not Not included: $100 graduation gift Welfare payments /government transfers Just giving money to someone to help them out Financial transactions (you’re not producing anything) o Note: sales commission is counted in GDP because they are being paid for doing something (only the sales commission is included, not the full payment) o Within a country: GDP only counts goods and services produced within the geographic borders of a country Ex: Production of a Japanese car factory in the U.S. is included in U.S. GDP It’s still being produced in the country even if it’s run by the Japanese Ex: Production of a U.S. Nike Shoe factory in Indonesia is NOT included in U.S. GDP Even if it is run by Americans, it is not within our borders o During a specific period: Only goods produced in 2016 are included in the figure for 2016 GDP If it was made in the previous year and then sold in 2016, it is not included in the 2016 GDP because it was already added to the 2015 GDP Two Ways to Measure GDP o Expenditure approach Y=C+I+G+NX Y: GDP C: Consumption Household spending on goods and services during the current period Consists of o Durable goods (long lasting appliances: house, oven, car) o Nondurable goods (stuff that doesn’t last: food, trash bag) o Services (What intermediaries (stock broker, real estate agent, lawyer) do for you when you pay them) Consumption is the largest component of GDP I: Private Investment Production or construction of capital goods that provide future service Consists of: o Fixed investment (Buying a new factory or new fork lift that will contribute to future goods) o Inventory Investment (Ending inventory – beginning inventory) G: Government Consumption and Gross Investment Government Expenditures Include spending on: o Goods and Services (staplers or paying police officers) o Capital goods (Goods that will be around for a while) Does not include transfer payments Government expenditures are counted at cost (not value) to tax payers NX: Net Exports o Resource cost-income approach
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