Economics 1022A/B Chapter Notes -Final Good, Intermediate Good, Xm Satellite Radio

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24 Apr 2012
Economics Textbook Notes
Measuring GDP and Economic Growth
Gross Domestic Product
GDP Defined
GDP is the market value of the final goods and services produced within a country in a
given time period.
Market Value
o The price at which items are traded in markets
Final Goods and Services
o A Final Good is an item bought by its final user during a specific time
Ex: Ford Truck
o An Intermediate Good is an item that is produced by one firm, bought by
another firm, and used as a component of a final good or service
Ex: Firestone tire
o Some goods can be both a final good or intermediate good depending on
what it is being used for
Ice cream at home or ice cream in a sundae at a restaurant
o Some goods are neither a final good nor an intermediate good
Stocks, bonds, second-hand goods
Produced within a Country
o Within the boarders of the country
In a Given Time Period
o Either quarterly or annually
GDP measures not only the value of total production, but also total income and total
GDP and the Circular Flow of Expenditure and Income
Households and Firms
o Households sell and firms buy the services of labour, capital, and land in
factor markets
o Firms sell and households buy consumer goods and services in the goods
The total payment for these goods and services is consumption
o Firms buy and sell new capital equipment in the goods market
The purchase of new plant, equipment, and buildings and the
additions to inventories are investment
o Governments buy goods and services from firms and their expenditure on
goods and services is called government expenditure
o Governments finance their expenditure with taxes and have financial
transfers such as benefits
Rest of the World
o Net Exports is the value of exports the value of imports
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