ECON 2000 Lecture Notes - Lecture 2: Gross National Product, Gdp Deflator
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ECON 2000
Lecture 2
Why Output = Expenditure
Unsold output goes into inventory, and is counted as ‘inventory
investment’… whether or not the inventory buildup was intentional
In effect, we are assuming that firms purchase their unsold output
GNP vs. GDP
Gross national product (GNP):
o Total income earned by the nation’s factors of production,
regardless of where located
Gross domestic product (GDP):
o Total income earned by domestically-located factors of production,
regardless of nationality
GNP – GDP = factor payments from abroad minus factor payments to
abroad
o Examples of factor payments: wages, profits, rent, interest &
dividends on assets
Real vs. Nominal GDP
Nominal GDP measures these values using current prices
Real GDP measure these values using prices of a base year
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Document Summary
Unsold output goes into inventory, and is counted as inventory investment" whether or not the inventory buildup was intentional. In effect, we are assuming that firms purchase their unsold output. Gross national product (gnp): total income earned by the nation"s factors of production, regardless of where located. Gross domestic product (gdp): total income earned by domestically-located factors of production, regardless of nationality. Gnp gdp = factor payments from abroad minus factor payments to abroad: examples of factor payments: wages, profits, rent, interest & dividends on assets. Nominal gdp measures these values using current prices. Real gdp measure these values using prices of a base year. Changes in nominal gdp can be due to: changes in prices, changes in quantities of output produced. Changes in real gdp can only be due to changes in quantities, because real gdp is constructed using constant base-year prices.