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Chapter 2

Chapter 2 Econ 202 Notes Looking for notes in .doc form and not .ppt? This is what you're looking for. With diagrams and and pictures from the textbook as well as Vaughn's in-class notes, this is the perfect set of study notes

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University of Regina
Maryann Vaughan

The Science of Macroeconomics Gross Domestic Product Expenditure and Income Two DefinitionsTotal expenditure on domesticallyproduced final goods and servicesTotal income earned by domesticallylocated factors of productionExpenditure equals income because every dollar spent by a buyer becomes income to the sellerFinal Goods Value Added and GDPThe value of the final goods already includes the value of the intermediate goods so including intermediate and final goods in GDP would be doublecounting Some rules for calculating GDP 1 The importance of inventories Since we want to measure production in a given year we add the value of unsold goods to inventories and include this value in the GDP calculation 2 We addup the many and varied goods and services by multiplying the quantity by the market price a Requires common unit of market price 3 Exclude intermediate goods Count the value of final goods and services only in the GDP calculation Otherwise doublecounting will occur Final good includes the value of the component parts 4 If goods or services do not have a price use an imputed value
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