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Chapter 5

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Department
Economics
Course
ECO1102
Professor
All Professors
Semester
Fall

Description
ECO1102Introduction to MacroeconomicsChapter 5Chapter 5 Measuring a Nations IncomeMacroeconomic Policy Challenges1Decrease unemployment2Stimulate economic growth GDP per capita3Stabilize the economic cycle mitigate fluctuations4Stabilize prices5Reduce budgetary deficits6Balance trade and capital flowsMeasuring a Nations IncomeMacroeconomics answers the following types of questions1Why is average income higher in some countries but lower in others2Why do prices rise rapidly during some time periods and are more stable during others3Why do production and employment expand in some years and contract in othersGDP Gross Domestic ProductGDP measures two things at once1The total income of everyone in the economy2The total expenditure on the economys output of goods and servicesFor an economy as a whole income must equal expenditure because every transaction has a buyer and a seller Every dollar spent by a buyer is a dollar earned by a sellerGDP is a measure of an economys income and expenditure It is the total market value of all final goods and services produced within a country in a given period of time It includes all items produced in the economy and sold legally in markets Exclusions from GDP include items never sold in the market such as homegrown vegetables drugs booze and cigarettesMeasures of IncomeGNPGDP
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