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MGEA06H3- Final Exam Guide - Comprehensive Notes for the exam ( 30 pages long!)


Department
Economics for Management Studies
Course Code
MGEA06H3
Professor
Iris Au
Study Guide
Final

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UTSC
MGEA06H3
Final EXAM
STUDY GUIDE

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lec01
18/1/8
MGEA06-lecture01 Notes-Introduction to
Macroeconomics
Chapters 6 & 7 Introduction & The Measurement of GDP
1. What is macroeconomics?
- Macroeconomics look at the intersections of different sections in an economy (Instead of
what happens in a specific market and we cannot just add these things up).
-Macro has a strong policy focus.
-The overall behavior of the economy: how the actions of all individuals and firms in the
economy interact to produce a particular economy ( high level of economic performance).
2. Figure 7-1 – An Expanded Circular-Flow Diagram (flow of the money)
!
Arrow: describing the flow of money.
-Gross domestic product (GDP) = consumer spending + Government spending + Investment +
Experts -Imports = C+G+I+NX
-Gross domestic product (GDP) = total spending on final goods and services / total values od all
final goods and services product within a country.
!1
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lec01
18/1/8
3. GDP (Gross domestic product)
-The total value of all final goods and services produced in the economy during a given yearfo.
-Final goods and end users are not the same as count intermediate goods and services
-The value of products produced within the country (produced in Canada).
4. Measuring GDP (3 ways)
󳄯The value-added approach:
-focuses on the value added of each producer in the economy.
-Value added = Value of the sales - Value of the purchase of intermediate goods and services.
󳄰The Expenditure Approach:
GDP = C+I+G+NX = aggregate expenditure(AE)
-Consumption (C) : spending by households on goods and service
-Investment (I) : spending money not for present consumption (private & public)
Business fixed investment: The purchase of capital equipment, machinery and production
plants
Residential investment: Building of new houses
Inventory in vestment: Firms hold in storage (materials , supplies, working process and finished
goods)
-Government spending (G) : Including spending on goods and services by different !
levels of government( EX:subsidy, child care benefit), exclusive of government transfer
payments.
-Net exports (NX): NX = Exports (X) – Imports (IM)
󳄱The Income Approach:
Income earned from production of goods and services
There are two sources of income:
A. Factor incomes: income earned by factors of production or inputs such as wages, salaries,
interest, rent business profits.
B. Non-Factor incomes: Net indirect taxes, capital depreciation.
Three approaches —— the same result
One person’s spending = anothers income
!2
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