ECN 204 Lecture Notes - Pg. 99, Weighted Arithmetic Mean, Gdp Deflator

12 views3 pages
20 Apr 2012
Chapter 5
Measuring the Economy’s output (Pg. 97)
Gross Domestic Product (Pg. 98)
Main measure of economy’s performance
Monetary measure of nation’s output
Form of aggregate output
Service or product counts towards GDP for country it was built/provided in
Monetary Measure
Price/Monetary value shows relative worth
Ex. Sofa vs. Computer
Avoiding Multiple Counting (pg.99)
All services and products must only be counted once
To avoid multiple counting GDP only takes into account Final goods
Final Goods are goods and services purchased for final use and not for resale
or further processing/manufacturing
Intermediate Goods are products that are purchased for resale or further
Including both types of goods would be Multiple counting
Value of final goods includes intermediate goods
Value Added is the value of the product sold by a firm less the value of the
products purchased and used by the firm to produce the product.
GDP Excludes Nonproduction Transactions:
Certain monetary transactions don’t count towards GDP because they don’t
involve final goods:
1. Financial Transactions:
Public Transfer Payments: Social Insurance, welfare, unemployment.
Recipient don’t add to CURRENT production
Private Transfer Payments: Monetary gifts, Parents give cash to kid.
Stock Market Transactions: Buying and selling of stocks and bonds
2. Second Hand Sales:
As soon as it has been bought it is considered used. Used items don’t contribute
to GDP at all.
Two ways of calculating GDP: Expenditures and Income (Pg. 101)
1. Expenditure Approach: The method to measure GDP that adds up all the
expenditures made for final goods and services.
Personal Consumption Expenditures (C) Household items (car, fridge, TV, bread, milk,
toothbrush, doctor, mechanic, and barber)
Gross Investment (Ig) Business items
1. Final purchases (equipment tools machines)
2. Construction
3. Changes in inventory
Government Purchases (G) expenditures for final g/s governments consume in providing
public services (Includes labor, No transfer payments [insurance/welfare/pension],
Net Exports (Xn) Very Significant Xn = exports (X) imports (M)
Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.