New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ECON 252: Chapter 5 & 6 Notes

by: Zach Weinkauf

ECON 252: Chapter 5 & 6 Notes ECON 252

Marketplace > Purdue University > Economcs > ECON 252 > ECON 252 Chapter 5 6 Notes
Zach Weinkauf

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes cover Chapter 5 and 6 of lecture and book notes.
Andres Vargas
Class Notes
Macroeconomics, Economics
25 ?




Popular in Macroeconomics

Popular in Economcs

This 3 page Class Notes was uploaded by Zach Weinkauf on Sunday February 21, 2016. The Class Notes belongs to ECON 252 at Purdue University taught by Andres Vargas in Fall 2016. Since its upload, it has received 32 views. For similar materials see Macroeconomics in Economcs at Purdue University.


Reviews for ECON 252: Chapter 5 & 6 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/21/16
Chapter 5: The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates 5.1 – Macroeconomic Questions  Income per Capita – income per person. o Number of People in Country / Nation’s Aggregate Income  Recessions – periods (lasting at least two quarters) in which aggregate economic output falls  Unemployed o Does not have a job o Has actively looked for work in prior four weeks o Currently available for work  Unemployment Rate – fraction of the labor force that is unemployed  National income accounts – measure the level of aggregate economic activity in a country  National Income and Product Accounts (NIPA) – system of national income accounts that is used by the U.S. government 5.2 – National Income Accounts: Production = Expenditure = Income  Gross Domestic Product (GDP) – the market value of the final goods and services produced within the borders of a country within a particular period of time  Identity – when two variables are defined in a way that makes them mathematically identical  Factors of Production – inputs of the production process  Circular Flows o Production o Expenditure o Income o Factors of Production  Value Added – firm’s sales revenue - firm’s purchases of intermediate products from other firms  Consumption – market value of consumption goods and consumption services that are brought by domestic households  Investment – market value of new physical capital that is brought by domestic households and domestic firms  Government Expenditure – market value of government purchases of goods and services  Exports – market value of all domestic produced goods and services that are purchased by households, firms, and governments in foreign countries  Imports – market value of all foreign-produced goods and services that are sold to domestic households, domestic firms, and the domestic government  National Income Accounting Identity – Y = C + I + G + X – M, decomposes GDP into consumption + investment + government expenditure + exports – imports  Labor Income – any form of payment that compensates people for their work  Capital Income – any form of payment that derives from owning physical or financial capital 5.3 – What isn’t measured by GDP?  Physical Capital Depreciation  Home Production  The Underground Economy  Negative Externalities  Gross Domestic Product vs. Gross National Product o GNP – market value of production generates by the factors of production – both capital and labor – possessed or owned by the residents of a particular nation  Leisure 5.4 – Real vs. Nominal  Nominal GDP – total value of production (final goods and services), using current market prices to determine the value of each unit that is produced  Real GDP – total value of production (final goods and services), using market process from a specific base year to determine the value of each unit that is produced o Real GDP Growth of 2013 = (Real GDP in 2013 – Real GDP in 2012)/Real GDP in 2012  GDP Deflator = Nominal GDP/Real GDP x 100  Consumer Price Index – 100 times the ratio of the cost of buying a basket of consumer goods using 2013 prices divided by the cost of buying the same basket of consumer goods using the base-year prices  Inflation Rate = (Price Index in 2013 – Price Index in 2012)/ Price Index in 2012 Chapter 6: Aggregate Incomes 6.1 – Inequality around the World  Income per capita = GDP per capita = GDP/Total Population  Purchasing Power Parity (PPP) – constructs the cost of a representative bundle of commodities in each country and uses these relative costs for comparing income across countries  Income per worker = GDP/Number of people in employment  Productivity – value of goods and services that a worker generates for each hour of work  One dollar a day per person poverty line – measure of absolute poverty used by economists and other social scientists to compare the extent of poverty across countries 6.2 – Productivity and the Aggregate Production Function  Three main reasons why productivity differs across countries o Human Capital – each person’s stock of skills to produce output or economic value o Physical Capital – any good, including machines and buildings, used for production  Physical capital stock – an economy is the value of equipment, structures and other non-labor inputs used in production o Technology – uses its labor and capital more efficiently and achieves higher productivity  Aggregate production function – describes the relationship between the aggregate GDP of a nation and its factors of production o Y = A x F(K,H)  Total efficiency units of labor – product of the total number of workers in the economy and the average human capital of each worker  Law of Diminishing Marginal Product – the marginal contribution of a factor of production to GDP diminishes when we increase the quantity used of that factor of production (holding all others constant) 6.3 – The Role and Determinants of Technology  Research and Development – activities directed at improving scientific knowledge, generating new innovations, or implementing existing knowledge in production in order to improve the technology of a firm or an economy  Efficiency of Production – the ability of an economy to produce the maximal amount of output from a given amount of factors of production and knowledge


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.