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Lecture

Macroeconomics - Chapter 20.docx

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Department
Economics
Course
EC140
Professor
Justin Smith
Semester
Winter

Description
Measuring GDP and Economic Growth GDP and its Importance - Main measure of economic well-being and standard of living - Can be compared with other countries - Can be compared within a country during a different time period - Measures total value of a production in a country - GDP is equivalent to total expenditure and income of a country - GDP is not 100% accurate of a country’s economic well-being Gross Domestic Product - Market value of all final goods and services produced in a country in a given time - 4 key parts of GDP: o Market Value o Final Goods and Services o Produced Within a Country o In a Given Time Period Market Value - Final goods and services are valued at their market value - Market value is used because comparing the same amount of different units is too hard o Ex. You can’t compare 5 computers and 5 apples, but you can do so if you have the market value Final Goods and Services - A final good/service is an item bought by a final user at a given time - An intermediate good is something used in creating a final good/service o Final goods include intermediate goods, so we avoid double counting - Final goods/services are what matters for our well-being - Only goods and services count; investments/transactions do not count because it is simply transferring of money - Second hand goods do not count because they were bought as final goods; this avoids double counting Produced Within a Country - GDP measures production within a country o Anything in produced in Canada counts towards Canadian GDP In a Given Time Period - GDP measures producing during a specific time period o Usually yearly or quarter-annually Measuring Canada’s GDP - 2 approaches: the expenditure and income approach o GDP = Expenditure = Income Expenditure Approach - Consumption + Gross Investment + Government Purchases + Exports – Imports o C + G + I + X – M o All goods and services are categorized into one of these groups - Consumption o Household spending  Durables (cars, fridges, etc.)  Non-durables (chocolate bars, food, etc.)
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