Econ 1051 Chapter 10
Econ 1051 Chapter 10 Economics 1051
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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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