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ECON 102 Lecture Notes - Lecture 6: Gdp Deflator, Producer Price Index

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School
U of M
Department
Economics
Course
ECON 102
Professor
Adam Stevenson

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ECON 102 Full Course Notes
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Document Summary

National income and product accounts (nipa) - measurements of the flows of money within an economy. To compare economies to others and itself to see growth. We can measure gdp with the complex circular flow diagram. 3 ways to calculate total economic activity. Gross domestic product (gdp) - value of final goods produced within the country. Value added of all production, final or not . Our primary definition of the economy"s size. Aggregate expenditure - all flows into the market for goods and services within the country. National income - total payments to factors of production within the country: payments to labor, capital, and land. Aggregate expenditure identity - describes spending on domestically produced goods and services, about equal to national income. Gdp = c + i + g + (ex - im) C = consumption, hh expenditure on domestically and foreign produced goods and services. I = investment, firm expenditure on domestically and foreign produced resources.

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Related Questions

Gross Domestic Product (GDP) only measures the value of marketed goods and services for a country during a given period of time.

Is the GDP measure underestimating or overestimating national production and total income in the economy? Why?

What are the limitations of the GDP in measuring total output and national welfare? What products (services) are excluded from the GDP computation?

The Gross National Product (GNP) of the United States is equal to

A. the value of the total income received by all of the residents of the United States.

B. the value of final goods and services produced within the United States.

C. the value of the total income received by all households in the United States, after taxes are paid.

D. the value of final goods and services produced by U.S. factors of production.

 

If a large amount of production within a country takes place at foreign-owned facilities, then it is likely that the country's GDP will be (larger than/smaller than) GNP.

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.