Ch. 10 The data of macroeconomics

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the study of how households and firms make decisions and how they interact in markets
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
for an economy as a whole, income must equal _____
gross domestic product
the market value of all final goods and services produced within a country in a given period of time
spending by households on goods and services with the exception of purchases of new housing- examples: durable and nondurable goods, personal goods, food, fridge,
spending on capital equipment, inventories, and structures, including household purchase of new housing- examples – domestic investment by US firms, purchase of final goods of machinery, construction cost for commercial or residential needs, change in total inventories,
government purchases
spending on goods and services by local, state, and federal governments- examples- defense and infrastructure
net exports
spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
nominal GDP
the production of goods and services valued at current prices
real GDP
the production of goods and services valued at constant prices (Base year)
GDP deflator
a measure of the price level calculated as the ratio of (nominal GDP/ real GDP) X 100
plant equipment
market value
how much something is worth on the market
book value
when selling equipment, how much would seller earn?
final goods and services
ex: a car, b/c it is fully made with all of the parts (intermediate) placed together
valuation at cost
services difficult to value like calling the police
non-market transactions
volunteer services, parenting
non-productive transactions
a. government transfer payments- Social security
b. transfers of wealth- money from grandparents to kids
c. transactions in securities markets – bonds
d. 2nd hand or used goods- thrift shop
GNP gross national product
value of all final goods and services produced by permanent residents during a particular period of time – citizens, ex pats
NNP net national product
a problem with GNP – it doesn’t take into account that plant equipment wares out and depreciates in value
NNP equation
NNP= GNP-depreciation
limitations of GNP
1. GDP has to be considered as a per capita figure
2. leisure
3. quality changes
GDP expenditure approach
C I G Nx
GDP equation
GDP = C+I+G+Nx
GDP can increase by…
1. more goods and services produced
2. price increase or inflation
why is real GDP a more accurate measure of an economy’s production than nominal GDP?
real GDP isn’t influenced by price changes, but nominal is
incorrect calculations of GDP
valuation at cost, non-market transactions, non-productive transactions
Categories: Macroeconomics