ECON 2010 Prin Macroeconomics Chapter 8 Notes

1Chapter 8IBackgroundaMacroeconomicsthe study of the economy as a whole including topics such as inflation unemploymenteconomic growthbMost economies do not experience constant performance but uneven cyclical growthWithin every economy certain industry sectors or regions may experience their own goalsThus the economy is always given attentionIIGDP Measuring total productionincomeaExpansiona period of increasing economic activity marked by rising levels total productiontotal employmentbRecessionthe period of declining economic activities where levels of total productiontotal employment decreaseiThee is a specific condition whereby a recession is officialcBusiness cyclealternating periods of economic expansioneconomic recessiondEconomic growthoften refers to the ability of an economy to produce increasing quantities of goodsservicesas an aside often this term is used to describe the rate of growth for GDPiEconomies have a growing populationiiEconomists suggest economic growth produces a better standard of livingWhy Because with increased output comes increased employmentwages allowing for greater access to goodsservicesGovernment will enjoy a larger tax base enabling greater spending on education infrastructuresocial servicesIIIGross Domestic Product Measures Total ProductionaMeasuring total production gross domestic productbGDP is the primary measure by which economists evaluate an economycGross Domestic Product GDPthe market value of all final goodsservices produced in a country during a period of time typically one yeariIt is calculated by taking a summation of all output multiplies by the goods own price1GDP is measured using market values not quantities2The word value is more important in the definition of GDPdGDP calculations are taken using recognized standardseNational Income Accountinga set of rulesdefinitions for measuring economic activity in the aggregate economy that is the economy as a wholeiIs a way of measuring total or aggregate productionfMeasuring total production Gross Domestic ProductiGDP includes only current production GDP includes only production that takes place during the indicated time periodiiGoods are classified primarily as1Final goods or servicesa good or service purchased by a final user car2Intermediate good or servicea good or service that is an input into another good or service tiregGDP calculations do not measure total transactions in the economy it counts final output but not intermediate goodsiCounting the sale of both finalintermediate goods would result in double counting of economic outputiiTwo ways to eliminate double counting1Calculate only the final output a firm would report how much it sold to consumershow much it sold to producers intermediate goods