Week 1 Macroeconomics Chapter 4
Week 1 Macroeconomics Chapter 4 Econ 202
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This 2 page Class Notes was uploaded by Pauline Kozakjian on Thursday July 28, 2016. The Class Notes belongs to Econ 202 at University of Oregon taught by Urbancic M in Fall 2016. Since its upload, it has received 21 views. For similar materials see macroeconomics in Macro Economics at University of Oregon.
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Date Created: 07/28/16
Week 1: Mon, Sep. 26 Wed, Sep. 28 Econ 202: Macroeconomics Office: PLC 531 Hours: Tuesday/ Thursday 9:00am11:00am Email: firstname.lastname@example.org Textbook: Macroeconomics Parkin, Michael version: 10, 11, or 12 30% Midterm 1 (Oct. 17) 30% Midterm 2 (Nov. 7) 40% Final (Thu, Dec 8. 10: 15am) Chapter 4: Measuring Economic Growth GDP and the circular flow of expenditure and income Household consumption spending (C) Firms investment spending (I) Government government spending (G) Rest of World Exports (X) minus Imports (M) = Net Export GDP can be measured as either total expenditure on goods/services or income received from goods/services Aggregate income = aggregate expenditures Y = C + I + G + X – M Real vs. Nominal GDP Real GDP: valued at prices fixed in reference or base, year Nominal GDP: valued at current market prices When measuring output, we care about changes in the quantity of goods/ services, not products. GDP Gross Domestic Product the market value of final goods/services produced in a country in a given time period. Excluding intermediate goods. Ex. Tires on a new truck (tires are already included in the price of the truck) Gov. doesn’t include transfer payments cash payments to individuals, such as social security Use 1: GDP and Standard of Living 2 Features of expanding living standards 1. Growth of potential GDP per person 2. Fluctuations of real GDP around potential GDP Potential GDP value of real GDP when all economy’s labor, capital, land, and entrepreneurial abilities are fully employed Expansion the phase in which a cycle moves from a trough to a peak Recession economic decline (peak to trough) Peak high point of economy Trough low point of economy Use 2: Compare Standard of Living across countries Don’t compare based on currency values take account for different prices Purchasing power parity (PPP) measures use same prices for both economies Limitations of GDP Doesn’t quantify all standard of living: 1. Household production (ex. At home child care) 2. Underground economic activity (illegal business, drugs, under the table payments) 3. Leisure time (vacation, time off) 4. Environment quality (errors, oil spill, cleaning) GDP doesn’t account for inequality
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