EC140 Lecture Notes - Lecture 19: Retained Earnings, Black Market, Delator

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raspberrymuskrat214

5 Apr 2016

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Historically, nominal gdp has increased faster than real gdp because nominal gdp takes into consideraion prices, were are real does not. So the reason is because the general price level has increased. The total value added in an economy is equal to the value of all inal goods produced. Outputs of one company are inputs in another. Measuring the value of output counts some output more than once. Measuring gdp is about measuring the inal producion. To avoid double couning we measure the value added by irms. The value added is sales revenue minus the cost of intermediate goods. Value added is equal to the wages paid to workers plus proits paid to workers. Total value added is a measure of total output. Gdp is the total value of inal goods and services produced. Gdp equals the value of expenditure on output. Gdp = producion = expenditure = income. It also equals the income generated by producing that output.

Related Questions

Intermediate goods are goods and services that are purchased for resale or for further processing or manufacturing. Final goods are consumer goods, capital goods, and services that are purchased by their final users, rather than for resale or for further processing or manufacturing. Including the value of intermediate goods in the measure of real GDP would amount to multiple counting, and therefore distort the value of GDP. Value added is the market value of a firm’s output less the value of the inputs the firm has bought from others.

Using the table below, calculate the total sales values, value-added, and fill in the missing boxes. The product is assembled for sale is a fancy wool suit.

Stages of Production	Sales Value of Materials or Product	Value Added
	$0
Firm A: Sheep Ranch		$120
Firm B: Wool Processor	$180
Firm C: Suit Manufacturer	$220
Firm D: Clothing Wholesaler		$50
Firm E: Retail Clothier (Market)		$80
Total Sales Value
Total Value Added

amethysttrout886

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Apples		Muffins
	Price	Quantity	Price	Quantity
	(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2008	1	150	2	160
2009	2	135	4	230
2010	3	110	4	165

Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP
Year	(Dollars)	(The base year 2008, dollars)
2008
2009
2010

1. From 2009 to 2010, nominal GDP (decreased or increased), and real GDP (decreased or increased).

2. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

A. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

B. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

C. Real GDP is not influenced by price changes, but nominal GDP is.

magentamarten240

Real versus nominal GDP

Consider a simple economy that produces two goods: cupcakes and erasers. The following table shows the prices and quantities of the goods over a three-year period.

Year	Cupcakes		Erasers
	Price	Quantity	Price	Quantity
	(Dollars per cupcake)	(Number of cupcakes)	(Dollars per eraser)	(Number of erasers)
2010	2	125	3	155
2011	4	135	3	210
2012	2	125	3	165

1. Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP
Year	(Dollars)	(Base year 2010, dollars)
2010
2011
2012

2. From 2011 to 2012, nominal GDP (increased/decreased) , and real GDP (increased/decreased) .

3. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

a. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

b. Real GDP is not influenced by price changes, but nominal GDP is.

c. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

yellowmule224

EC140 Lecture Notes - Lecture 19: Retained Earnings, Black Market, Delator

EC140 Full Course Notes

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