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Chapter 5 Notes FULL lecture notes for Chapter 5

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ECON 101
Angela Trimarchi

Econ 102 Chapter 5 NotesProf Angela TrimarchiChapter 5Measuring a Nations Income Gross Domestic ProductGDPIs the market value of all final goods and services producedIt is strictly a measure of PRODUCTIONAnd income earned within a countryIn a given period of time such as a yearValued at market pricesDomestic means within the borders of a countryImportant Facts about GDPGDP is basically a production conceptGDP is a flow variable through timeie not Stock variableMarket Valuesee following exampleExamplePriceItemPriceQuantityQuantityCDs15100015000Tapes 5200010000Calculate GDP by multiplying PQ for each good and then adding your results togetherGDP 1510005200025000Important Facts about GDP continuedIn the national accounts firms and the government are the units which produce output in the domestic economyGDP includes only final goods not intermediate goodsoinput into the production processItems not included in GDPUsed or second hand goodsNonmarketed goods and servicesFinancial assetsEcon 102 Chapter 5 NotesProf Angela TrimarchiHow do we actually measure GDP Three MethodsValueadded production ApproachoMeasures items included in GDP by measuring value added at each stage of productionExpenditure ApproachoCalculates GDP by adding together spending by all the sectors groups in the economyIncome ApproachoMeasures GDP by adding together the incomes of the factors of production used to produce domestic productValueAdded ExampleCol iCol iiCol iiiCol ivCol iiiiiStage of Total ValueCost of Value AddedProductionIntermediate Total ValueCost of ProductsIntermediate ProductsSheep Ranch60060Wool 1006040ProcessorSuit 17510075ManufacturerRetail Outlet25017575Total585335250Contribution to GDP250Total value of all transactions 585
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