ECO100Y1 : Summary notes 3

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12 Sep 2010
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Purchase of goods and services and capital sales to businesses must be netted out. 50: proper contribution = 50, bread is the final product (brought by consumers). Real vs. nominal: real: figures adjusted for average price increases and inflation, nominal: figures not adjusted for average price increases and inflation. Price index: helps determine whether increases in gdp is prices or production. Gross national product: concentrates on who owns the assets tracing where profits goes. Output/gdp gap: potential gdp vs. actual gdp, employment vs. unemployment. There is always frictional unemployment (between jobs): definition of unemployment differ country to country, us: not active = not in labour force, canada: no jot = unemployment. Assumptions: only c and i g, x, m = 0, no inflation nominal = real, more output until yf (full employment gdp). Households and consumption: c = c(income, assets/wealth, interest rate). This rate is called the marginal propensity to consume (mpc).

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