ECON 2000 Study Guide - Winter 2018, Comprehensive Midterm Notes - Money Supply, Price Level, Interest Rate

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ECON 2000
MIDTERM EXAM
STUDY GUIDE
Fall 2018
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ECON 2000
Lecture 1
GDP
Total expenditure on domestically-produced final goods and services
Total income earned by domestic households spent on final goods and
services
Expenditure = Income
Value of the final good OR sum of value added at all stages of
production
Value of the final goods already includes the value of intermediate
goods (DO NOT DOUBLE COUNT)
Y = C + I + G + NX (Value of total output = Aggregate expenditure)
Households + Firms
Households do labour
Firms pay households income
Households use income as expenditures
Firms give households goods and services for these expenditures
Expenditure = Income
Value Added
Must add values based on price, not on total amount of goods
(aggregate value of goods)
Must add values of increase in production (DO NOT DOUBLE COUNT)
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Used Goods
Sale of used/transferred/inventoried goods reflects transfer of an asset
not addition to GDP
Consumption
The value of all goods and services bought by households
These include: Durable goods (car), nondurable goods (food), services
(air travel)
Investment
Spending on capital, a physical asset used in future production
Includes:
o Business fixed investment
Spending on plant and equipment
o Residential fixed investment
Spending by consumers and landlords on housing units
o Inventory investment
The change in the value of all firms’ inventories
Investment vs. Capital: Investment is SPENDING on new capital
Stock: quantity measured at a point in time (e.g., US capital stock = $10
trillion on 1/1/2012)
Flow: quantity measured per unit of time (e.g., US investment was $2
trillion during 2012)
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