ECON 295 Lecture Notes - Lecture 2: Black Market, Street Sweeper, Gdp Deflator

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lemonfox406

23 Mar 2017

School

McGill University

Department

Economics

Course

ECON 295

Professor

Mayssun El- Attar Vilalta

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Document Summary

Macro lecture 2- the measurement of national income. Three methods for measuring national income (output): total value added from domestic production, total expenditures on domestic output, total income generated by domestic production. Because of the circular flow of income, these three measures yield the same total gdp. Production occurs in stages-(cid:373)ost fir(cid:373)s produ(cid:272)e outputs that are other fir(cid:373)"s i(cid:374)puts. Ea(cid:272)h fir(cid:373)"s (cid:272)o(cid:374)tri(cid:271)utio(cid:374) to total output is its value added. Summing value added avoids the problem of double counting when measuring total output. Total value added in the economy is called gross domestic product (gdp) Consider adding up the expenditures needed to purchase the final output produced in any given year. There are four broad expenditure categories: consumption. Actual consumption expenditure (ca) includes expenditure on all final goods during the year. Actual investment expenditure (ia) is expenditure on the production of goods not for present consumption, including: When net investment increases, capital stock is growing.

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?

ambergnu461

What is the market for factors of production?

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.
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.
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.
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.
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.

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

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ECON 295 Lecture Notes - Lecture 2: Black Market, Street Sweeper, Gdp Deflator

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