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National-Income Accounting: Gross Domestic Product and the Price Level

C h a p t e r 2. National-Income Accounting: Gross Domestic Product and the Price Level. Nominal GDP. the dollar (or euro, etc.) value of all the goods and services that an economy produces during a specified period, such as a year. Nominal GDP.

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National-Income Accounting: Gross Domestic Product and the Price Level

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  1. C h a p t e r 2 National-Income Accounting: Gross Domestic Product and the Price Level Macroeconomics Chapter 2

  2. Nominal GDP • the dollar (or euro, etc.) value of all the goods and services that an economy produces during a specified period, such as a year. Macroeconomics Chapter 2

  3. Nominal GDP • Flow variable - it measures the dollar amount of goods produced per unit of time, such as a year. • GDP in current dollars • Services by government: measured by costs Macroeconomics Chapter 2

  4. Macroeconomics Chapter 2

  5. Real GDP • Calculating Real GDP • GDP in constant dollars • Multiply each year’s quantity of output of each good by the price of the good in a base year. • Chain-weighted real GDP Macroeconomics Chapter 2

  6. Calculations • (nominal GDP)/(implicit price level) = real GDP or • implicit price level = (nominal GDP)/(real GDP) Macroeconomics Chapter 2

  7. GDP as a Welfare Measure GDP does not: • Consider change in income distribution • Include non-market goods. • Assign value to leisure. • Consider environmental damage. Macroeconomics Chapter 2

  8. GDP by Expenditure • Personal Consumption Expenditures • Gross Private Domestic Investment • Government purchases of Goods and Services • Exports and Imports Macroeconomics Chapter 2

  9. Macroeconomics Chapter 2

  10. Measuring GDP by Income • National Income – Income earned by factors of production. Macroeconomics Chapter 2

  11. Relationship between GDP and National Income Macroeconomics Chapter 2

  12. National Income by Sector Macroeconomics Chapter 2

  13. Prices • Consumer Price Index (CPI) • Producer Price Index (PPI) • Problem of CPI(PPI) substitution quality new production Macroeconomics Chapter 2

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