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Econ 1051 Chapter 10

by: Ashley Albers

Econ 1051 Chapter 10 Economics 1051

Ashley Albers
GPA 3.3

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Chapter 10 notes, GDP
General Economics
George Chikhladze,Martha Steffens
Class Notes
economics 1051, GDP
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This 2 page Class Notes was uploaded by Ashley Albers on Thursday March 17, 2016. The Class Notes belongs to Economics 1051 at University of Missouri - Columbia taught by George Chikhladze,Martha Steffens in Spring 2016. Since its upload, it has received 22 views. For similar materials see General Economics in Economcs at University of Missouri - Columbia.


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Date Created: 03/17/16
Chapter 10: GDP and Economic Growth Gross Domestic Product (GDP)  Measure of aggregate output. At the same time it measures total spending and total income of economy  GDP – Market value of all final goods and services produced within a nation in a given year  Monetary measure (dollar value) o Market value of everything  Avoid multiple counting o Market value of FINAL goods  Comparing Heterogeneous Output by Using Money Prices o First year it has more sofas less computers but has market value of $5500 o Second year they had more computers but less sofas but has a market value of $7000 o Once the monetary value is attached you can see how wealthy the country is  Exclude financial transactions o Public transfer payments  Medicaid, Medicare, social security  There was no production o Private transfer payments  Trust funds o Stock or bond market transactions  Exclude secondhand sales o Were already included in GDP when it was initially produced  Measuring GDP o Expenditure approach  Count sum of money spent buying the final goods  Personal consumption expenditures (C)  Durable consumer goods  Nondurable consumer goods  Consumer expenditures for services  Gross private domestic investment (Ig)  Machinery, equipment, and tools  All construction  Creation of new capital assets  Noninvestment transactions excluded  Government purchases (G)  Expenditures for goods and services  Expenditures for publicly owned capital  Excludes transfer payments  Net Exports (Xn)  Add exported goods and subtract imported goods  Xn= Exports – Imports  GDP = C + Ig + G + Xn  GDP = $10.7 + 1.9 +3 – o.5 = 15 trillion  Nominal versus real GDP o GDP is a dollar measure of production o Using dollar values creates problems o Nominal GDP  Use prevailing price o Real GDP  Reflect changes in price  Economic growth o Increase in real GDP or real GDP per capita over some time period o Percentage rate of growth o Growth as a goal: small difference in growth rates over time lead to large differences in growth rates over time lead to large differences in GDP per catptia o Artithmetic of growth: rule of 70 o Growth in the US real GSP 1950-2009 Approximate number of years required to double real G 70_P__ annual percentage rate of growth  Increase sixfold  3.2 percent per year o Growth in the US rela GDP per capita  Increased more than threefold  2 percent per year  Determinents of Growth o Supply factors  Increases in quantity and quality of natural resources  Increase in quality and quantity of human resources  Increases in the supply (or stock) of capital goods


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