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Chapter 13: GDP

Chapter 13: GDP. Pgs: 321-333. Gross Domestic Product. Market value of all final goods and services produced in the economy over a year. Final versus Intermediate. Final are goods either available to be purchased or purchased for final use. Ex. Pastries and bicycles

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Chapter 13: GDP

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  1. Chapter 13: GDP Pgs: 321-333

  2. Gross Domestic Product • Market value of all final goods and services produced in the economy over a year

  3. Final versus Intermediate • Final are goods either available to be purchased or purchased for final use. • Ex. Pastries and bicycles • Intermediate are goods purchased for resale or for use in making other goods. • Ex. Flour and aluminum

  4. Components of GDP • Personal consumption expenditures • Gross private domestic investment • Government purchases of goods and services • Net exports of goods and services

  5. Price Index • Measures the price level for a given period relative to the base period. • Nominal GDP is the measurement of GDP using current prices. • Real GDP is the measurement of GDP using constant prices. • GDP deflator is a weighted average of the prices of all final goods and services produced in the economy.

  6. Formulas • Price Index=Price for period in question/Price in base period(multiply all this by 100) • Real GDP= Nominal GDP/Price Index(in decimal form) • Real GDP=Nominal GDP/GDP Inflator

  7. Business Cycles • Fluctuations in the level of economic activity that are recurring • Four phases: expansion, peak, contraction, and trough • Expansion-real GDP has a rapid increase • Peak-real GDP maxes out • Contraction-real GDP decreases • Trough-real GDP bottoms out at a low point

  8. Real GDP • 9/11 actually caused GDP to go up • More money was spent on clean-up, rescue, etc • People also demanded more security • People we not made better off which GDP doesn’t account for one’s well-being.

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