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Econ 2 Week 2

by: Katherine Notetaker

Econ 2 Week 2 Econ 2

Katherine Notetaker
GPA 3.83

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About this Document

These notes cover price ceiling, price floor, and GDP
Introduction to Macroeconomics
Ajay Shenoy
Class Notes
#macroeconomics, #macroeconomics, #econ2, #ajay, #econ2, Shenoy
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This 2 page Class Notes was uploaded by Katherine Notetaker on Sunday April 17, 2016. The Class Notes belongs to Econ 2 at University of California - Santa Cruz taught by Ajay Shenoy in Winter 2016. Since its upload, it has received 14 views. For similar materials see Introduction to Macroeconomics in Economcs at University of California - Santa Cruz.


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Date Created: 04/17/16
● Price ceiling is binding when it actually matters  ○ However, price ceiling is not binding when it is above the equilibrium price  ○ The price ceiling is only binding when it is below the equilibrium price  ● Excess supply equates to surplus  ○ A surplus of consumer goods moccurs when there is a binding price floor  ○ The number of producers exceeds the number of consumers  ○ Price floor only binds if it is above the equilibrium price  ● Markets are useful because they can allocate resources efficiently  ○ Meddling with the market generates perverse results  ● Placing limits on the price of rent is very common  ○ Rent control decreases developer’s incentives to build more units   ● Deadweight loss occurs when total surplus is lost due to the distortion of market actions  ● Deadweight Loss equals to Total surplus without distortions ­ total surplus with distortion  ● Gross domestic Product ­ the market value of all final goods and services produced  within a country in a year  ● GDP per capita ­ GDP/ population  ● Market value­ add up the value of every good produced  ● Intermediate good­ are sold to firms and then bundled or processed with other goods or  services for sale at a later stage  ● Final goods are the finished goods sold to final users and then consumed or held in  personal inventories  ○ To avoid double counting, only final goods are included in GDP  ● Goods are tangible  ● Services are intangible  ● GDP measures production   ○ Sale of used goods is not used  ○ The sale of financial assets such as stocks and bonds are not included  ○ The services of realtors, stock brokers, used car salesmen are included because  their services represent current economic activity  ○ Only production within a country counts of GDP  ● Gross national product is the value of goods and produced by United states’ citizens no  matter where they live  ● In a year, GDP measures a flow, it measures a rate of production during a given time  period  ● In contrast to a nation’s wealth, the value of a nation’s assets at a point in time has no  time dimension  ●  Nominal variables are valued at current prices  ● Real variables valued at prices in some base year  ● Real GDP is what welfare matters  ● Most economists would choose real GDP as the best single indicator of economic  performance  ● Media usually report growth in nominal GDP  ● If you want to compare GDP over time,   ● Recessions two consecutive quarters of negative GDP growth  ● Y= C + I +G + NX   


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