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Week 1 Macroeconomics Chapter 4

by: Pauline Kozakjian

Week 1 Macroeconomics Chapter 4 Econ 202

Marketplace > University of Oregon > Macro Economics > Econ 202 > Week 1 Macroeconomics Chapter 4
Pauline Kozakjian
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About this Document

Chapter 4- Measuring economic growth GDP and the circulation of expenditure and income
Urbancic M
Class Notes
Macroeconomics, Economics




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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: 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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