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## Continuation of Chapter 2 Notes: Chain Weighted GDP

by: Mitchell Chin

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0

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# Continuation of Chapter 2 Notes: Chain Weighted GDP Econ 303

Marketplace > University of Illinois at Urbana-Champaign > Economics > Econ 303 > Continuation of Chapter 2 Notes Chain Weighted GDP
Mitchell Chin
UIUC

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As stated above this is just a continuation of my last set of notes. It talks about Nominal GDP, Real GDP, GDP Deflator, Price Index, and the Labor Force. Hope this helps you beautiful people.
COURSE
Macroeconomics
PROF.
Rui Zhao
TYPE
Class Notes
PAGES
2
WORDS
CONCEPTS
Macroeconomics
KARMA
25 ?

## Popular in Economics

This 2 page Class Notes was uploaded by Mitchell Chin on Saturday September 3, 2016. The Class Notes belongs to Econ 303 at University of Illinois at Urbana-Champaign taught by Rui Zhao in Fall 2016. Since its upload, it has received 4 views. For similar materials see Macroeconomics in Economics at University of Illinois at Urbana-Champaign.

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Date Created: 09/03/16
Chapter 2: Chain Weighted GDP Computing GDP in a simple economy: yearA yearA yearA Quantites- x 1 , x2 , … , x n Value Added Prices- p 1year, p2year, … , pnyearA YearA yearA yearA yearA yearA yearA yearA Nominal GDP = p 1 x1 + p 2 x2 + … + p n xn Real GDP YearB= p 1yearAx1yearB+ p 2yearAx2yearB+ … + p nearAxnyearB “n” is the final year Nominal GDP = Price index (aka GDP Deflator) x Real GDP Conditions:  Nominal GDP increases more than real GDP, prices increase (inflation)  Nominal GDP increase by same amount as real GDP , price stable Inflation rate: measures changes of general price level within specific period of time (change of purchasing power of money). GDP Deflator = (Nominal GDP/Real GDP) x 100 Inflation rate of desired year = ((GDP deflator or CPI of desired year/GDP deflator or CPI of base year)-1) x 100% To measure the aggregate price level, economists calculate the cost of purchasing a basket of goods and services. Price index in a given year = (Cost of market basket given year/Cost of market basket base year) x 100 Consumer price index (CPI): measures cost of market basket of typical urban American family. Two Types of Price Changes: Changes of GENERAL price level (Inflation) vs Changes of RELATIVE prices Chart using Cars and Apples: Year A Year B yearA yearA yearA yearA yearA yearB yearA Real GDP using Year A Prices: p c xc + p a x a p c x c + p a xayearB Real GDP using Year B Prices: p cyearBxcyear+ p ayearBxayearA p 1earBx1yearB+ p 2yearB yearB x2 Find the indexes by taking YearB / YearA but prices must stay constant. Chain Weighted Real GDP: 1) For any two adjacent years, compute Fisher index. 2) Multiple the indexes, then square root the product. Counting our Labor Force: Employment: number of people currently employed in the economy (full or part time). Unemployment: number of people who are looking for work but aren’t currently employed. Labor Force: Employment + Unemployment Labor force participation rate = (labor force/population age 16+) x 100 Unemployment rate = (Number of unemployed/labor force) x 100

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