Eco- CH. 11 (GDP)
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| 3 Main MACRO Indicators (describing the state of the econ.) | 1) economic growth (INC GDP--> $28 T)
2) price level
3) unemployment rate
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| production method | P X Q
(selling price X quantity prod. -G & S)
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| spending method | C + I + G + Nx --> net exports= exports-imports
(consumers, businesses, gov't, other countries)
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| income method (factor income) | -income that flows --> households related to the production in spending of & for G & S
rent + wages + interests + profits= $29 T
(land, labor, physical capital, entrepreneurship)
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| 3 basic assumptions--flow diagram | 1. no gov't & no other countries
2. ALL money in/(income) is spent
3. no inflation (prices are stable)
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| GDP | total market value of all final goods & services produced within a country in 1 year
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| market value --3 ways to calculate GDP | final: GDP only counts finished products, NOT intermediate goods & raw materials
-WITHIN A COUNTRY
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| Included in GDP | -domestically produced final G & S
Business Investment Spending
a) spending $ on physical capital that isn't used up in prod. process
b) construction of all structures
c) anything added to a business' inventory
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| Excluded (out) from GDP | 1. any spending on intermediate goods or inputs bc they're used up in prod. & are part of the value or final good
2. spending on used goods
3. any spending on financial assets (stocks & bonds)
4. any gov't spending on TRANSFER PAYMENTS
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| Excluded (out) from GDP (continued) | 5. non-market legal act. in spending (under table)
6. non-market illegal act. in spending (black market)
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| disposable income | factor income + gov't transfer payments - taxes
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| nominal GDP (current or money GDP) | -GDP NOT adjusted for inflation
-current year output X current year selling prices
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| real GDP | -GDP adjusted for inflation
-current year output/production X BASE YR. selling prices
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| base year | -year against which all other years are compared
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| real GDP per capita | -a.k.a income per person
-this is the best way to compare countries economies
real GDP
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pop.
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