Econ 200, Week 6 Notes
Econ 200, Week 6 Notes ECON 200
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This 3 page Class Notes was uploaded by Charles Smith on Saturday October 8, 2016. The Class Notes belongs to ECON 200 at James Madison University taught by in Fall 2016. Since its upload, it has received 7 views. For similar materials see Introduction to Macroeconomics in Economics at James Madison University.
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Date Created: 10/08/16
DAY 11: READ CHAPTER 6! Measuring Progress Matters: Example: ● 80% of India lives on less than 2$ a day. ● More than 100 million indians live at an American/European standard of living. ● India’s Economy is growing rapidly. We can measure growth by comparing the change of GDP per capita over time. Gross Domestic Product (GDP)- Market Value of all final goods and services produced within a country in a year. GDP per capita: GDP divided by a country’s population. Market Value: GDP is measured in dollars since dollars are a common measure of value. GDP is calculated by multiplying the price of final goods and services by their quantities, and adding the market values. GDP is done on a yearly measure or annual income. *OF ALL FINAL Intermediate goods 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 that are delivered immediately to the consumer or distributor for profit. Goods are tangible things, like cars, food, clothes. Services are intangible like, transportation, haircuts, medical care. BOTH are in GDP. Services go up as a share of U.S. GDP. Production GDP measures production. Sale of used goods are not included. The sale of financial assets such as stocks and bonds are not included. HOWEVER, the services of realtors and stockbrokers ARE counted in GDP. Only the production that takes place within the borders in a country is included in GDP. GNP (Gross National Product) includes production by the citizens of that country no matter where they live. The growth rate of GDP tells us how rapidly the country’s production is rising or falling over time. (GDP(of 2015) − GDP(of 2014)) ÷ GDP(of 2014) Nominal Variables- not been adjusted for price changes Real Variables-Have not been adjusted for price changes. Economists are more interested in this. DAY 12: Real Growth per capita is the best reflection of changing living standards. Per capita real GDP= real GDP divided by population. Recession (definition by National Bureau of Economic Growth)- “... a significant, widespread, decline in economic activity spread across the economy, lasting for more than a few months, normally visible in Real GDP, real income, employment, industrial production, and wholesale retail sales.” There have been a total of 11 official recessions since 1948. Business Fluctuations/Cycles are the short run movements in real GDP around its long term trend. 1. Many goods and services we don’t know the true market value. a. GDP does not count underground markets. i. Illegal Economy ii. Off the books activity. b. GDP does not count nonmarket production i. Work done in home by household members. 2. Failing to count nonmarket production= 2 problems a. Biases over time. i. Ex: More women in the workforce than 1950 so before 1950 the majority of a woman's work was not counted. Now it would be considered a cleaning/housekeeping S ERVICE. b. Biases across nations. i. What one nation could easily consider a credible good or service, another may not. 3. GDP does not count leisure. a. The GDP gap looks bigger between rich and poor countries when you include indulgences. 4. GDP does not count BADS a. Ex: Pollution, decrease in resources, decrease in animals and plant species, crime. b. Economist agree that it should be decreased because of bads somehow, the question is how. 5. GDP doesn't measure distribution of income. High GDP per capita, does not means that everyone in that country is well off.
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