Chapter 4 Measuring GDP

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Chapter 4 Measuring GDP
2014-10-19 21:17:54
ECON 202
ECON 202
University of Oregon ECON 202
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  1. GDP
    Gross Domestic Product - the market value of the final goods and services produced within a country in a given time period.

    Does not include intermediate goods
  2. Circular flow of expenditure and income
    Households --> Consumption spending (C) Firms --> Investment spending (I) Governments --> Government spending (G) Rest of World --> Exports (X) – Imports (M) = Net Exports
  3. GDP measurement
    • Aggregate Income = Aggregate Expeditures
    • Y = C+I+G+X-M
  4. Real GDP
    GDP valued at prices fixed in a reference, or base year
  5. Nominal GDP
    GDP valued at current market prices
  6. Two features of expanding living standard
    • 1. The growth of potential GDP per person
    • 2. Fluctuations of real GDP around potential GDP
  7. Potential GDP
    The value of real GDP when all the economy's labor, capital, land and entrepreneurial ability are fully employed
  8. Purchasing power parity (PPP)
    measures use same prices for both economies
  9. Limitations of GDP
    • Household production
    • Underground economic activity
    • Leisure time
    • Environmental Quality

    ***All of these effect the standard of living