ECO 1102 Lecture Notes - Lecture 3: Intermediate Good, Canada Pension Plan, Transfer Payment
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Chapter 5-Lecture Week 2
TWO BRANCHES OF ECONOMICS
Microeconomics: the study of how individuals and how firms make decisions and how they
interact with one another in markets.
Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment,
and economic growth.
ECONOMY’S INCOME MUST EQUAL EXPENDITURE
MEASURING A NATION’S INCOME
Gross Domestic Product (GDP): measures the total income of a nation; the most closely watched
economic statistic because it is the best measure of a society’s economic well-being.
o “GDP is the market value of all final goods and services produced within a country in a
given period of time.”
o GDP adds together many different kinds of products into a single measure of the value
of economic activity.
To do this, it uses market prices. Because market prices measure the amount
people are willing to pay for different goods, they reflect the value of those
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