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Lecture 6

# Econ 105 Lecture 6 Jan 24th.doc

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School
Department
Economics
Course
ECON 105
Professor
Brian Krauth
Semester
Winter

Description
Econ 105 Lecture 6 Jan 24th Chapter 5: Measuring an nation's income -GPD(Gross Domestic Product) = is the market value of all final goods and services produced within a country in a given period of time -Market value : we produce a variety of goods. Need a consistent unit. Remember from supply and demand: -(1) The price is the opportunity cost. -(2) The price is at least as high as the value of the good to its purchaser. -Final: not used to produce other goods (at least not immediately). Rules out intermediate goods. -e.g. tires sold to Ford and put on a truck to sell (intermediate) -e.g. tires sold to a Ford owner to put on her truck (final) -This is done to avoid double counting -Produced within a country = within the countries border - Domestic = within its borders - National (gross national product) = produced by the owners from a country (can be produced within a different countries borders) -Given a period of time -Stocks vs. flows -Capital = stock -Investment = flow -Circular Flow diagram: -total production = total expenditures = total income -GPD can be calculated by any of the 3 ways listed above, all 3 numbers should be equivalent -Some related quantities: -GNP (Gross national product) = market value of all final goods and services produced using factors of production owned by a country's nationals = (GDP) + (net factor payments from abroad). -Net national product = (GNP) - (depreciation on capital) -National income -Personal income -Personal disposable income -Limitations of GDP (note: the limitations depend on what we are using it for) -Seemingly important, but not really in practice: -Distinctions between GDP, GNP, NNP, etc. Not much difference in practice, and there is often a trade-off between: -theoretically preferabl
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