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Econ 2105, Week 6 notes

by: Hannah Johnston

Econ 2105, Week 6 notes ECON 2105

Hannah Johnston
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These notes cover what was discussed in Thursday's class about GDP. Econ 2105, William Amponsah, Section W, TR 11 AM class.
Economics in a Global Society
William Amponsah
Class Notes
Econ, Economics, Macroeconomics, Marco, GDP, Real GDP, nominal GDP, inflation unemployment GDP growth investment




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This 5 page Class Notes was uploaded by Hannah Johnston on Friday September 30, 2016. The Class Notes belongs to ECON 2105 at Georgia Southern University taught by William Amponsah in Fall 2016. Since its upload, it has received 21 views. For similar materials see Economics in a Global Society in Macro Economics at Georgia Southern University.

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Date Created: 09/30/16
Gross Domestic Production Class notes taken 9/29/2016, DR. Amponsah, Section W, TR 11a­ 12:15p. Chapter 8: What is it, and how is it calculated?  GDP includes both: o Spending and expenditure o Income or output value calculations  Expenditure looks at: o Consumption (C) o Investment (I) o Government spending (G) o Net exports (NX)  TOTAL VALUE OF EXPORTS – TOTAL VALUE OF IMPORTS  Consumption (C)  Savings (S)  Taxes (T)  Net Exports (NX)  Consumption counts: o Durable; cars, furniture… o Non­durable: Food, clothes etc.… o Services: Education, medical, haircuts etc.… Consumption does  not count new houses; they are counted as investments. Rent payments are included.  INVESTMENT: o New factories o New offices o Additional inventory (Inventory that businesses were not  able to sell last year) o And NEW houses (Houses built in the current year only)  Business Fixed investment: o Factories and things to produce goods.  Residential Investment o New houses o Changes in business investments  GOVERNMENT CONSUMPTION Other terms include: o Gross investment o Government purchases This is spending by federal, state and local government on good as services Services include: 2 o Teacher’s salaries o Highways o Aircraft carries o Etc. (Does not include transfer of payments such as social security,  unemployment and insurance benefits.) Net Exports Net exports= exports – imports Exports: foreign spending on our goods Imports: C, I, and G that are spent on services and good from abroad Value added method The final selling price must equal the sum of values added to the  product at each stage of production. Short comings of GDP Does not measure house hold production (Goods and Services people produce for themselves) Does not include the Underground economy (The buying and selling  of illegal goods) Which may be up to 10% of the economy. GDP Per Capita 3 This is used to represent the difference in standards of living  in an economy. Total GDP/population=GDP Per capita This, however, is not adjusted for o Value of leisure o Pollution and negative effects of production o Crime and social problems (The more crime a country has,  the more the Government ‘G’ spends on the police force,  and prisons.) o Distribution of income Nominal GDP The value of final goods and services at CURRENT year prices. Formula: (Example year)=(Price of good * Quantity) + (Price of good  * Quantity)…= Nominal GDP Or The sum of all products time their quantity in a given year. Real GDP The value of fine goods and services evaluated at BASE year  prices Formula: 4 Calculate using the same method as Nominal GDP, except, you will use the prices of the BASE year.  (Example year)=(BASE PRICE OF GOOD * CURRENT YEAR  QUANTITY) +(BASE PRICE OF GOOD * CURRENT YEAR  QUANTITY)…= Real GDP Growth rate: GDP(year 1)­GDP(year2)/GDP(year1)*100=Growth rate GDP Deflator Deflator=Nominal GDP/Real GDP*100. 5


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