Week 1 (GDP)
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This 3 page Class Notes was uploaded by Emmaroseglaser on Thursday September 17, 2015. The Class Notes belongs to Econ3020 at Tulane University taught by Antonio Bojanic in Fall 2015. Since its upload, it has received 460 views. For similar materials see Intermediate Macroeconomics in Economcs at Tulane University.
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Date Created: 09/17/15
Week 1 3 main ways to measure GDP Production expenditure and income Production The market value of all final goods and services newly produced over a fixed period of time Market value The price that goods and services sell for 0 Issues 0 Nonmarket goods and services family run business with employed children 0 Black market underground economy 0 Bartering 0 Solution imputed values gvt estimate Final the end product sold to the consumer 0 Do not count intermediate goods goods added to make final goods 0 Capital goods a machine that creates final goods is sustainable but it is only counted when the machine is purchased 0 Inventory investment changes in levels of inventory in set amount of time is counted in GDP Newly produced must be new and sold only one time 0 1e If you buy a used car the price of the car does not go into GDP but the price for the services of the salesman etc does 0 Fixed period of time GDP is a ow not a stock 0 Flow over a period of time 0 Stock is a set time Expenditure The total spending on financial goods and services currently produced in an economy C Households o 70 of the GDP 0 Durable goods goods that last more than 3 years 0 Non durable goods goods that don t last long 0 Services 1 Business investment 0 Most unpredictable and volatile aspect o Fixed investment structure capital goods 0 Inventory investment can be negative 0 Residential investment purchases of homes G Government spending 0 Federal ie Military 0 State and local greater than federal XN net exports 0 Exports 0 Imports Income National income depreciationGNP GNP net factor income GDP 0 National income 0 Compensation for employees wages salaries benefits 0 Other income self employed royalties 0 Corporate profits income for businesses after taxes Depreciation o The wear and tear of equipment 0 Have to add it because it is subtracted when measuring national income 0 Gross national product 0 Similar to GDP but includes production abroad 0 Net factor income 0 Amount of money that US companies make abroad amount of money that foreign companies make in the US Nominal vs Real GDP Nominal uses current prices and doesn t account for in ation Real uses base year with fixed prices only to be used Ex 1 Country X produces apples and oranges The price of apples in 2005 was 50 and the price of oranges was 200 In 2012 1 billion apples were sold and 1 billion oranges were sold A Calculate real GDP for 2012 with a base year of 2005 price apples 2005 x quantity sold apples 2012price oranges 2005 x quantity sold 2012 5 x 1 billion 2 x 1 billion 25 billion So real GDP in 2012 utilizing prices in 2005 is 25 billion B Calculate real GDP for 2013 with a base year of 2005 if 2 billion apples were sold and 15 billion oranges were sold 5 x 2 billion 2 x 15 billion 4 billion So Real GDP in 2013 utilizing 2005 prices is 4 billion