ECO105Y1 Chapter Notes - Chapter 6: Creative Destruction, Externality, Potential Output

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Nominal gdp: value at current prices of all final products/services produced annually in a country. Nominal allows for gdps from different times to be compared. Intermediate products are not included because their value is reflected in price of final goods. Real gdp: value at constant prices of all final products and services produced in a country. By holding prices constant, any difference in gdp is due to quantities. Real gdp per person: real gdp / population. Value added: value of output minus value of intermediate products and services bought from other businesses. C + i + g + x - im = y. Subtracted because inputs are used to increase output. Disposable income: aggregate income minus net taxes. Invest in factories/machinery time lag until money flow. Where to buy imports from, where to invest in. Take money from all, loan to all. Says law fails if consumers save instead of spend.

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