ECON 2020 Section 1 Lecture Notes.docx

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University of Colorado Colorado Springs
ECON 2020
Dale De Boer

ECON 2020 In Class Lecture Notes Section 1 Macro-Economic Measurement Output and Growth -GDP -The total market value of all final goods and services produced in an economy in a year. -What it doesn’t cover -Home Production -“Under the table” transactions -Black market activities Main Categories of GDP -Consumption (C)  60%-70% -Investment (I)  New physical capital goods, ~15% -Government Expenditures (G)  ~18% , things the government buys from businesses in the US -Net Exports (NX)  Exports minus Imports (-3%) -GDP = C+I+G+NX *Growth Formula (GDP 2012 GDP 2011/(GDP 2011 all of this times 100 *GDP can also be calculated by summing up all (price x quantity) GDP can increase from a price increase and/or an output increase. Nominal GDP -Uses current year prices times the quantity of items to determine the GDP Real GDP -Uses a base year, that is determined a stable economic year, for prices to times by the quantity to determine the GDP Inflation -Measured by the % change of a price index -Price Indexes -GDP deflator  Nomial GDP divided by Real GDP; this can have either a base 1 or base 100 which are used interchangeably by different people. -Consumer Price Index  Nominal Consumer Cost/Real Consumer Cost -Real Wage=Nominal Wage divided by Price Index Real Wage is just a number to determine what current wages would be if they had grown equal to the rate of inflation. It is sometimes used to determine current minimum wages but we have not currently kept up with the real wage. *Inflation Calculation  (Index 2012– Index 2011/(Index2011) times 100 *Real Rate (Nominal Rate)-(Inflation Rate) Biase
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