ECO209Y5 Lecture Notes - Lecture 1: Gdp Deflator, Real Change, Income Approach
Document Summary
In an amusement park there are independently owned rides, games, and food vendors. Visitors pay for all of this with tickets ( = 10 tickets) Operators redeem tickets for cash at the end of the day and business is predicted to be busy so they hire extra help. Gdp = of tickets used at the end of the day. = 8 tickets now, a one time change. In the short run suppliers, if the change is expected, will charge fewer tickets than before. The supplier and buyer will still be paying the same amount. If the change is unexpected, then less people will be coming to the rides. Gdp will fall and they may let go of some extra people hired. In the long run, suppliers will learn and lower their ticket prices and the change will again remain neutral. A lot of disagreement exists in macro modeling. Nominal change in the price of goods/services.
