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Lecture

ECON 1102 Lecture Notes - Gdp Deflator, Nominal Interest Rate, Real Wages


Department
Economics
Course Code
ECON 1102
Professor
Liza Bristow

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Macroeconomics
Macroeconomics policies
Monetary: Interest rates. Goes two ways going to get more money off of interest and
borrowing money is going to be harder.
Fiscal: government budgets, expenditure, revenue.
Expenditure<Revenue= surplus
Expenditure>Revenue= deficit
Structural: more capital goods than consumer goods is a structural change.
Output of market value; Final goods and services= When selling a car at the price
which is market value it includes the value of all the goods that went into the
making of the car.
GDP= geographic limitations
GNP= ownership of resources
Capital good: a good that will create more value in the future ex. Machine. They are
included in GDP calculations.
Second hand goods excluded from GDP.
When selling a house the value of house isn’t included because it isn’t new but the
commission is included
When selling stocks and shares the price of stocks and shares are not included but
the commission gained is included because it is a service and something is being
created.

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Second Note
Not included in GDP: illegal activities, underground economy and barter economy
(dentist does teeth for his accountant and is not recorded), house hold production
(repairing your own home)
When people cut down trees the value is only then become evident to the economy,
no value is seen in the trees or natural resources until they are used up
Natural disasters bring a increase to GDP
Income approach of finding GDP: land: farm income, rental income
Labour: wages and salaries value of fringe benefits
Capital: profit, dividends, interest, investment income minus income received from
abroad minus interest paid on public debt
Find in-between value of expenditure approach and income approach.
Market value: price * quantity
Nominal GDP= actual price * actual quantity
Real GDP: base year price * actual quantity
Years
Pucks
Root BEER
MADE
SOLD
MADE
SOLD
2005
100
5$
300
20$
2010
125
7$
400
18$
2005 nominal GDP = (5*100)+(20*300)= $6500
2010 nominal GDP = (7*125)+(18*400)= $8075
2010 real GDP (2005 base year) = actual quantity *2005 price
=(125*5)+(400*20)
=$8625
Base year nominal GDP: real GDP
GDP deflator= nominal GDP/real GDP * 100
2010 GDP deflator =8075/8625*100=93.6
Genuine progress index
Genuine happiness index: Bhutan want to see their economic self-reliance. Tourists
must pay a daily fee to stay there, this helps preserve the land as well as the culture,
and they want good governments in the form of democracy.
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