CAS EC 102 Lecture 1: Lecture 1: 1/23

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emeraldgoose991

23 Jan 2017

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● GDP is the market value of all final goods and services produced within a country in a

year

○ *The last time (transaction) the good is bought or sold

● GDP is the market value of all final goods and services produced within a country in a

year

○ Has to be something that was actually made - excludes undeveloped land +

financial bonds/stocks

○ Used goods don’t count

● GDP is the market value of all final goods and services produced within a country in a

year

○ Count production that takes place in a country regardless of the producer

Measuring GDP

● Keep track through process called “National Income Accounting”

○ Look at all final transactions and use statistical techniques and estimates

● Calculated by the bureau of economic analysis - a division of the Department of

Commerce

The Expenditure Method

● Calculates GDP by adding..

● 1st component: Consumption Spending

○ Personal expenditures - 70% of total spending in economy

● 2nd component: Investment - 3 categories - 17% of total spending

1. Plant and Equipment (PPE)

a. Spending by businesses/firms for tools, machines, buildings

b. Biggest component of investment spending

2. Residential investment

a. Housing - doesn’t count as consumption counts as investing (buying

houses)

3. Change in inventories

a. Goods that have been produced but have not been sold

● Government Purchases - 18%

○ A lot of money that they spend they haven’t bought anything so the GDP only

includes what they actually do buy

● Net Exports of goods and services - -3%

○ Net exports = exports - imports

13% 16%

An Important Identity

Y = C + I + G + NX

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*the last time (transaction) the good is bought or sold. Has to be something that was actually made - excludes undeveloped land + financial bonds/stocks. Gdp is the market value of all final goods and services produced within a country in a year. Count production that takes place in a country regardless of the producer. Keep track through process called national income accounting . Look at all final transactions and use statistical techniques and estimates. Calculated by the bureau of economic analysis - a division of the department of. Personal expenditures - 70% of total spending in economy. A lot of money that they spend they haven"t bought anything so the gdp only includes what they actually do buy. Net exports of goods and services - -3% Y = c + i + g + nx. Y = gdp = total production = total value of output.

Related Questions

1. In the actual economy, households

a. spend all of their income.

b. divide their income among spending, taxes, and saving.

c. buy all goods and services produced in the economy.

d. Both (a) and (c) are correct.

2. Gross domestic product is defined as

a. the quantity of all final goods and services demanded within a country in a given period of time.

b. the quantity of all final goods and services supplied within a country in a given period of time.

c. the market value of all final goods and services produced within a country in a given period of time.

d. Both (a) and (b) are correct.

3. GDP adds together many different kinds of products into a single measure of the value of economic activity by using prices determined by

a. banks.

b. economists.

c. the government.

d. markets.

4. Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

a. caused measured GDP to fall.

b. not caused any change in measured GDP.

c. caused measured GDP to rise.

d. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

5. A steel company sells some steel to a bicycle company for $150. The bicycle company uses steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

a. $150 to GDP.

b. $250 to GDP.

c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

d. $400 to GDP.

6. The total sales of all firms in the economy for a year

a. equals GDP for the year.

b. is larger than GDP for the year.

c. is smaller than GDP for the year.

d. Any of the above is possible.

7. GDP is equal to

a. the market value of all final goods and services produced within a country in a given period of time.

b. Y.

c. C + I + G + NX.

d. All of the above are correct.

8. The consumption component of GDP includes spending on

a. durable goods and nondurable goods, but not spending on services.

b. durable goods and services, but not spending on nondurable goods.

c. nondurable goods and services, but not spending on durable goods.

d. durable goods, nondurable goods, and services.

periwinkletoad580

7. The difference between nominal GDP and real GDP is that nominal GDP:

	A.	measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years.
	B.	is measured in dollar terms, whereas real GDP is measured in terms of numbers of goods and services produced
	C.	measures the total value of only final goods and services, whereas real GDP measures the value of all goods and services, both intermediate and final
	D.	measures a country's production of final goods and services at fixed prices, whereas real GDP measures a country's production of all final goods and services at current market prices

carminekoala560

The GDP is the

A) monetary value of all final goods and services produced within a nation in a particular year.
B) national income minus all non-income charges against output.
C) monetary value of all economic resources used in producing a year's output.
D) monetary value of all goods and services, final and intermediate, produced in a specific year.

apricotmink264

CAS EC 102 Lecture 1: Lecture 1: 1/23

CAS EC 102 Full Course Notes

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