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Chapter 20

# ECON 1010 Chapter Notes - Chapter 20: Final Good, Capital Good, Time Series

Department
Economics
Course Code
ECON 1010
Professor
Simin Seury
Chapter
20

This preview shows pages 1-3. to view the full 15 pages of the document.
Gross%Domestic%Product
GDP%Defined
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Market%Value
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produced'
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Produced%within%a%country
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=
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In%a%given%period%of%time
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quarterly%GDP%data <%&\$-\$9+-&C\$6-00+5\$)*+\$annual%GDP%data
=
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-
GDP%and%the%Circular%flow%of%Expenditure%and%Income
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Households
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=
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Governments
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+O7+35')1&+\$%3\$4%%5(\$-35\$(+&/'6+(\$'(\$6-00+5\$government%
expenditure.
§
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Rest%of%the%World
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exports%--35\$J19\$4%%5(\$-35\$(+&/'6+(\$2&%,\$)*+\$&+()\$%2\$)*+\$8%&05\$<
imports%
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-
GDP%Equals%Expenditure%Equals%Income
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+O7%&)(
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2-6)%&(\$%2\$7&%516)'%3\$1(+5\$)%\$7&%516+\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$<8-4+(C\$
'3)+&+()C\$&+3)\$-35\$7&%2')
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-
Why%is%domestic%product%'gross'
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:*+\$%77%(')+\$%2\$4&%((\$'(\$R3+)RC\$8*'6*\$,+-3(\$-2)+&\$(1J)&-6)'34\$)*+\$
5+7&+6'-)'%3\$%2\$6-7')-0
§
Depreciation%'(\$)*+\$5+6&+-(+\$'3\$/-01+\$%2\$2'&,R(\$6-7')-0\$)*-)\$&+(10)(\$2&%,\$
8+-&\$-35\$)+-&\$-35\$%J(%0+(6+36+
:*+\$)%)-0\$-,%13)\$(7+3)\$J%)*\$J19'34\$3+8\$6-7')-0\$-35\$&+70-6'34\$
5+7&+6'-)+5\$6-7')-0\$'(\$6-00+5\$gross%investment
Net%investment%F\$4&%((\$'3/+(),+3)\$<5+7&+6'-)'%3
§
Gross%Investment%'(\$%3+\$%2\$)*+\$+O7+35')1&+(\$'3\$)*+\$+O7+35')1&+\$-77&%-6*\$
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L%\$-4-'3\$)*+\$&+(10)'34\$/-01+\$%2\$)%)-0\$7&%516)\$'(\$-\$4&%((\$,+-(1&+
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-
The%Expenditure%Approach
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(+&/'6+(\$!C\$-35\$3+)\$+O7%&)(\$%2\$4%%5(\$-35\$(+&/'6+(\$HY<ZI
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&+()\$%2\$)*+\$8%&05
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=
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Investment''(\$)*+\$+O7+35')1&+\$%3\$6-7')-0\$+T1'7,+3)\$-35\$J1'05'34(\$
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Government%Expenditure%on%Goods%and%Services%'(\$)*+\$+O7+35')1&+\$
J9\$-00\$0+/+0(\$%2\$4%/+&3,+3)\$%3\$4%%5(\$-35\$(+&/'6+(C\$(16*\$-(\$3-)'%3-0\$
5+2+36+\$-35\$4-&J-4+\$6%00+6)'%3
"%+(\$3%)\$'36015+\$transfer'payments'C\$(16*\$-(\$13+,70%9,+3)\$
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(+&/'6+(
=
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Net%Exports%of%goods%and%services%-&+\$)*+\$/-01+\$%2\$+O7%&)(\$,'31(\$
)*+\$/-01+\$%2\$',7%&)(
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-
The%Income%Approach
:*+\$income%approach%,+-(1&+\$!"#\$J9\$(1,,'34\$)*+\$'36%,+(\$)*-)\$2'&,(\$
7-9\$*%1(+*%05(\$2%&\$)*+\$2-6)%&(\$%2\$7&%516)'%3\$)*+9\$*'&+\$<8-4+(\$2%&\$0-J%1&C\$
'3)+&+()\$2%&\$6-7')-0C\$&+3)\$2%&\$0-35C\$-35\$7&%2')\$2%&\$+3)&+7&+3+1&(*'7
X+\$5'/'5+\$)*+\$'36%,+(\$'3\$)*+\$National'income'and'Expenditure'Accounts'
'3)%\$)8%\$J&%-5\$6-)+4%&'+(
X-4+(C\$(-0-&'+(C\$-35\$(1770+,+3)-&9\$0-J%1&\$'36%,+?M
Q)*+&\$2-6)%&\$'36%,+(DM
Wages,%salaries%and%supplementary%labour%income
>(\$)*+\$7-9,+3)\$2%&\$0-J%1&\$(+&/'6+(M
§
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Other%Factor%Incomes
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2&%,\$3%3<2-&,\$13'36%&7%&-)+5\$J1('3+((+(
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'36015+(\$(%,+\$0-J%&\$'36%,+\$2&%,\$(+02<+,70%9,+3)
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Indirect%Tax
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6%3)&-()\$-\$5'&+6)\$)-O\$'(\$-\$)-O\$%3\$'36%,+
§
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Subsidy
G\$(1J('59\$'(\$-\$7-9,+3)\$J9\$)*+\$4%/+&3,+3)\$)%\$-\$7&%516+&M
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)-O+(\$-35\$(1J)&-6)\$(1J('5'+(M
§
Z-.'34\$)*'(\$-5]1(),+3)\$J&'34(\$1(\$)%\$net%domestic%income%at%market%
prices%
§
X+\$()'00\$,1()\$4+)\$2&%,\$-\$3+)\$)%\$-\$4&%((\$,+-(1&+M\$:%)-0\$+O7+35')1&+\$'(\$-\$
4&%((\$31,J+&\$J+6-1(+\$')\$'36015+(\$4&%((\$'3/+(),+3)
[+)\$5%,+()'6\$'36%,+\$-)\$,-&.+)\$7&'6+(\$'(\$-\$3+)\$'36%,+\$,+-(1&+\$J+6-1(+\$
6%&7%&-)+\$7&%2')(\$-&+\$,+-(1&+5\$after'deducting'depreciation'<)*+9\$-&+\$-\$
3+)\$'36%,+\$,+-(1&+
:%\$4+)\$2&%,\$3+)\$'36%,+\$)%\$4&%((\$'36%,+\$8+\$,1()\$-55\$5+7&+6'-)'%3
X+\$*-/+\$3%\$-&&'/+5\$)%\$!"#\$1('34\$)*+\$'36%,+\$-77&%-6*
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:*'(\$31,J+&\$'(\$3%)\$+O-6)09\$)*+\$(-,+\$-(\$!"#\$1('34\$)*+\$+O7+35')1&+\$
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statistical%discrepancy%%-35\$'(\$6-0610-)+5\$ -(\$!"#\$+O7+35')1&+\$<!"#\$
'36%,+\$)%)-0
"'(6&+7-369\$'(\$3+/+&\$0-&4+
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-
Nominal%GDP%and%Real%GDP
Real%GDP%'(\$)*+\$/-01+\$%2\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$7&%516+5\$'3\$-\$4'/+3\$9+-&\$
8*+3\$valued'at'the'prices'of'a'reference'base'year'
E9\$6%,7-&'34\$)*+\$/-01+\$%2\$7&%516)'%3\$'3\$)*+\$)8%\$9+-&\$-)\$)*+\$(-,+\$
7&'6+(C\$8+\$&+/+-0(\$)*+\$6*-34+\$'3\$7&%516)'%3
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S1&&+3)09\$)*+\$&+2+&+36+\$J-(+\$9+-&\$'(\$D@@^\$-35\$8+\$5+(6&'J+\$&+-0\$!"#\$
-(\$,+-(1&+5\$'3\$D@@^\$5%00-&(\$\$<'3\$)+&,(\$%2\$8*-)\$)*+\$5%00-&\$8%105\$J19\$
'3\$D@@^
§
Nominal%GDP%'(\$)*+\$/-01+\$%2\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$7&%516+5\$'3\$-\$4'/+3\$
9+-&\$8*+3\$/-01+5\$-)\$)*+\$7&'6+(\$%2\$)*-)\$9+-&
[%,'3-0\$!"#\$'(\$]1()\$-\$,%&+\$7&+6'(+\$3-,+\$2%&\$!"#
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-
Calculating%Real%GDP%-471
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-
The%Uses%and%Limitations%of%Real%GDP
N6%3%,'()(\$1(+\$+()',-)+(\$%2\$&+-0\$!"#\$2%&\$)8%\$,-'3\$71&7%(+(P
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For%example:%'3\$?ece\$&+-0\$!"#\$7+&\$7+&(%3\$8-(\$B?e@@@\$-35\$'3\$D@?@\$
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Two%Features%of%our%expanding%living%standards
The%growth%of%potential%GDP%per%person
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Fluctuations%of%real%GDP%per%person
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The%Standard%of%Living%Across%Countries
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The%Time%Series%Graph
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Mathematical%Note
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Find%the%average%of%two%percentage%changes
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J9\$-00\$0+/+0(\$%2\$4%/+&3,+3)\$%3\$4%%5(\$-35\$(+&/'6+(C\$(16*\$-(\$3-)'%3-0\$
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"%+(\$3%)\$'36015+\$transfer'payments'C\$(16*\$-(\$13+,70%9,+3)\$
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-
The%Income%Approach
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7-9\$*%1(+*%05(\$2%&\$)*+\$2-6)%&(\$%2\$7&%516)'%3\$)*+9\$*'&+\$<8-4+(\$2%&\$0-J%1&C\$
'3)+&+()\$2%&\$6-7')-0C\$&+3)\$2%&\$0-35C\$-35\$7&%2')\$2%&\$+3)&+7&+3+1&(*'7
X+\$5'/'5+\$)*+\$'36%,+(\$'3\$)*+\$National'income'and'Expenditure'Accounts'
'3)%\$)8%\$J&%-5\$6-)+4%&'+(
X-4+(C\$(-0-&'+(C\$-35\$(1770+,+3)-&9\$0-J%1&\$'36%,+?M
Q)*+&\$2-6)%&\$'36%,+(DM
Wages,%salaries%and%supplementary%labour%income
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§
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§
Other%Factor%Incomes
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2&%,\$3%3<2-&,\$13'36%&7%&-)+5\$J1('3+((+(
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'36015+(\$(%,+\$0-J%&\$'36%,+\$2&%,\$(+02<+,70%9,+3)
§
Indirect%Tax
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6%3)&-()\$-\$5'&+6)\$)-O\$'(\$-\$)-O\$%3\$'36%,+
§
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§
Subsidy
G\$(1J('59\$'(\$-\$7-9,+3)\$J9\$)*+\$4%/+&3,+3)\$)%\$-\$7&%516+&M
§
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§
Z-.'34\$)*'(\$-5]1(),+3)\$J&'34(\$1(\$)%\$net%domestic%income%at%market%
prices%
§
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4&%((\$31,J+&\$J+6-1(+\$')\$'36015+(\$4&%((\$'3/+(),+3)
[+)\$5%,+()'6\$'36%,+\$-)\$,-&.+)\$7&'6+(\$'(\$-\$3+)\$'36%,+\$,+-(1&+\$J+6-1(+\$
6%&7%&-)+\$7&%2')(\$-&+\$,+-(1&+5\$after'deducting'depreciation'<)*+9\$-&+\$-\$
3+)\$'36%,+\$,+-(1&+
:%\$4+)\$2&%,\$3+)\$'36%,+\$)%\$4&%((\$'36%,+\$8+\$,1()\$-55\$5+7&+6'-)'%3
X+\$*-/+\$3%\$-&&'/+5\$)%\$!"#\$1('34\$)*+\$'36%,+\$-77&%-6*
§
:*'(\$31,J+&\$'(\$3%)\$+O-6)09\$)*+\$(-,+\$-(\$!"#\$1('34\$)*+\$+O7+35')1&+\$
-77&%-6*C\$)*+\$4-7\$J+)8++3\$)*+\$)8%\$5'22+&+3)\$!"#\$6-0610-)'%3(\$'(\$6-00+5\$
statistical%discrepancy%%-35\$'(\$6-0610-)+5\$ -(\$!"#\$+O7+35')1&+\$<!"#\$
'36%,+\$)%)-0
"'(6&+7-369\$'(\$3+/+&\$0-&4+
§
-
Nominal%GDP%and%Real%GDP
Real%GDP%'(\$)*+\$/-01+\$%2\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$7&%516+5\$'3\$-\$4'/+3\$9+-&\$
8*+3\$valued'at'the'prices'of'a'reference'base'year'
E9\$6%,7-&'34\$)*+\$/-01+\$%2\$7&%516)'%3\$'3\$)*+\$)8%\$9+-&\$-)\$)*+\$(-,+\$
7&'6+(C\$8+\$&+/+-0(\$)*+\$6*-34+\$'3\$7&%516)'%3
§
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-(\$,+-(1&+5\$'3\$D@@^\$5%00-&(\$\$<'3\$)+&,(\$%2\$8*-)\$)*+\$5%00-&\$8%105\$J19\$
'3\$D@@^
§
Nominal%GDP%'(\$)*+\$/-01+\$%2\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$7&%516+5\$'3\$-\$4'/+3\$
9+-&\$8*+3\$/-01+5\$-)\$)*+\$7&'6+(\$%2\$)*-)\$9+-&
[%,'3-0\$!"#\$'(\$]1()\$-\$,%&+\$7&+6'(+\$3-,+\$2%&\$!"#
§
-
Calculating%Real%GDP%-471
Example:%8+00\$6-0610-)+\$&+-0\$!"#\$2%&\$-3\$+6%3%,9\$)*-)\$7&%516+(\$%3+\$
6%3(1,7)'%3\$4%%5C\$%3+\$6-7')-0\$4%%5\$-35\$%3+\$4%/+&3,+3)\$+O7+3(+M\$[+)\$
NO7%&)(\$-&+\$_+&%
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9+-&I\$-35\$'3\$D@?a
>3\$7-&)\$GIC\$8+\$6-0610-)+\$[%,'3-0\$!"#\$'3\$D@@^
K%&\$+-6*\$')+,\$8+\$,10)'709\$T1-3)')9\$7&%516+5\$'3\$D@@^\$J9\$')\$7&'6+\$'3\$
D@@^\$)%\$2'35\$)*+\$)%)-0\$+O7+35')1&+\$%3\$)*+\$')+,
§
X+\$)*+3\$(1,\$)*+\$)%)-0\$+O7+35')1&+(\$2&%,\$+-6*\$')+,\$'3\$D@@^\$)%\$2'35\$
3%,'3-0\$!"#C\$8*'6*\$'3\$D@@^\$'(\$B?@@\$,'00'%3
§
E+6-1(+\$D@@^\$'(\$)*+\$J-(+\$9+-&C\$J%)*\$3%,'3-0\$-35\$&+-0\$ !"#\$+T1-0\$
B?@@\$,'00'%3
§
>3\$7-&)\$EI\$8+\$6-0610-)+\$3%,'3-0\$!"#\$'3\$D@?a\$8*'6*\$8-(\$B`@@\$,'00'%3
Z10)'709\$D@?a\$T1-3)')9\$7&%516+5\$J9\$D@?a\$7&'6+(\$)%\$2'35\$)%)-0\$
+O7+35')1&+\$%2\$-\$4'/+3\$4%%5\$'3\$D@?a
§
X+\$)*+3\$(1,\$17\$)*+\$)%)-0\$+O7+35')1&+(\$%2\$)*+\$4'/+3\$')+,(\$2%&,\$
D@?a\$)%\$2'35\$3%,'3-0\$!"#\$%2\$D@?a
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E1)\$J9\$*%8\$,16*\$*-(\$7&%516)'%3\$'36&+-(+5b\$U+-0\$!"#\$8'00\$)+00\$1(
§
>3\$7-&)\$SI\$\$8+\$6-0610-)+\$&+-0\$!"#\$'3\$D@?a
:*+\$T1-3)')'+(\$%2\$)*+\$4%%5(\$-35\$(+&/'6+(\$7&%516+5\$-&+\$)*%(+\$%2\$
D@?aC\$-(\$'3\$7-&)\$JI
§
:*+\$7&'6+(\$-&+\$)*%(+\$'3\$)*+\$&+2+&+36+\$J-(+\$9+-&\$<D@@^\$-(\$'3\$7-&)\$-I
§
K%&\$+-6*\$')+,C\$8+\$,10)'709\$)*+\$T1-3)')9\$7&%516+5\$'3\$D@?aC\$J9\$')(\$
7&'6+\$'3\$D@@^
§
X+\$)*+3\$(1,\$)*%(+\$+O7+35')1&+(\$)%\$2'35\$&+-0\$!"#\$'3\$D@?aC\$8*'6*\$'(\$
B?c@\$,'00'%3
§
:*'(\$31,J+&\$'(\$8*-)\$)%)-0\$+O7+35')1&+\$8%105\$*-/+\$J++3\$'3\$D@?a\$'2\$
7&'6+(\$*-5\$&+,-'3+5\$)*+\$(-,+\$-(\$)*+9\$8+&+\$'3\$D@@^
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[%,'3-0\$!"#\$'3\$D@?a\$HB`@@\$,'00'%3I\$'(\$`\$)',+(\$')(\$/-01+\$'3\$D@@^C\$J1)\$
&+-0\$!"#\$'3\$D@?a\$'(\$%309\$?Mc\$)',+(\$')(\$/-01+\$HB?c@\$,'00'%3I\$<-\$c@d\$
'36&+-(+\$'3\$7&%516)'%3
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-
The%Uses%and%Limitations%of%Real%GDP
N6%3%,'()(\$1(+\$+()',-)+(\$%2\$&+-0\$!"#\$2%&\$)8%\$,-'3\$71&7%(+(P
:%\$6%,7-&+\$)*+\$()-35-&5\$%2\$0'/'34\$%/+&\$)',+
:%\$6%,7-&+\$)*+\$()-35-&5\$%2\$0'/'34\$-6&%((\$6%13)&'+(
The%Standard%of%Living%over%Time
Q3+\$,+)*%5\$%2\$6%,7-&'34\$)*+\$()-35-&5\$%2\$0'/'34\$%/+&\$)',+\$'(\$)%\$6-0610-)+\$
&+-0\$!"#\$7+&\$7+&(%3\$'3\$9+-&(
Real%GDP%per%person%'(\$&+-0\$!"#\$5'/'5+5\$J9\$7%710-)'%3
U+-0\$!"#\$7+&\$7+&(%3\$)+00(\$1(\$)*+\$/-01+\$%2\$4%%5(\$-35\$(+&/'6+(\$)*-)\$)*+\$
-/+&-4+\$7+&(%3\$6-3\$+3]%9
E9\$1('34\$&+-0\$!"#C\$8+\$&+,%/+\$-39\$'3201+36+\$)*-)\$&'('34\$7&'6+(\$-35\$-\$&'('34\$
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X+\$-&+\$'3)+&+()+5\$'3\$J%)*\$)*+\$0%34<)+&,\$)&+35(\$-35\$(*%&)+&<)+&,\$
6960+(\$'3\$)*+\$()-35-&5\$%2\$0'/'34
§
Long%Term%Trend
G\$4%%5\$8-9\$%2\$\$6%,7-&'34\$&+-0\$!"#\$7+&\$7+&(%3\$%/+&\$)',+\$'(\$)%\$
+O7&+((\$')\$-(\$-\$&-)'%\$%2\$(%,+\$&+2+&+36+\$9+-&
§
For%example:%'3\$?ece\$&+-0\$!"#\$7+&\$7+&(%3\$8-(\$B?e@@@\$-35\$'3\$D@?@\$
')\$8-(\$B`f@@@\$H&%135+5\$)%\$)*+\$3+-&+()\$)*%1(-35I
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L%\$&+-0\$!"#\$7+&(%3\$'3\$D@?@\$8-(\$5%1J0+\$8*-)\$')\$8-(\$'3\$?ece
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?ece\$<8+&+\$)8'6+\$-(\$8+00\$%22
=
§
Two%Features%of%our%expanding%living%standards
The%growth%of%potential%GDP%per%person
>(\$)*+\$,-O',1,\$0+/+0\$%2\$&+-0\$!"#\$)*-)\$6-3\$J+\$7&%516+5\$
8*'0+\$-/%'5'34\$(*%&)-4+(\$%2\$0-J%1&C\$6-7')-0C\$0-35C\$-35\$
+3)&+7&+3+1&'-0\$-J'0')9\$)*-)\$8%105\$J&'34\$&'('34\$'320-)'%3
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#%)+3)'-0\$!"#\$5%+(3g)\$&'(+\$-)\$-\$constant'pace'
®
=
Fluctuations%of%real%GDP%per%person
X+\$6-00\$)*+\$2016)1-)'%3(\$'3\$)*+\$7-6+\$%2\$+O7-3('%3\$%2\$&+-0\$
®
:*+\$J1('3+((\$6960+\$'(\$-\$7+&'%5'6\$J1)\$'&&+410-&\$17<-35<
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,+-(1&+(\$%2\$+6%3%,'6\$-6)'/')9
®
:*+\$J1('3+((\$6960+\$'(3R)\$&+410-&\$0'.+\$)*+\$7*-(+(\$%2\$)*+\$
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®
Expansion
Recession
®
And%two%turning%points
Peak
Trough
®
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'36&+-(+(
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)%)-0\$%1)71)C\$'36%,+\$+,70%9,+3)C\$-35\$)&-5+C\$
1(1-009\$0-()'34\$2&%,\$('O\$,%3)*(\$)%\$-\$9+-&C\$-35\$
,-&.+5\$J9\$6%3)&-6)'%3(\$'3\$,-39\$(+6)%&(\$%2\$)*+\$
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G3\$+O7-3('%3\$+35(\$-35\$&+6+(('%3\$J+4'3(\$-)\$-\$J1('3+((\$
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J+4'3(
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=
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-
The%Standard%of%Living%Across%Countries
:8%\$7&%J0+,(\$-&'(+\$8*+3\$1('34\$&+-0\$!"#\$)%\$6%,7-&+\$0'/'34\$()-35-&5(\$
-6&%((\$6%13)&'+(
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(-,+\$7&'6+(
-
Limitations%of%Real%GDP
U+-0\$!"#\$,+-(1&+(\$)*+\$/-01+\$%2\$4%%5(\$-35\$(+&/'6+(\$)*-)\$-&+\$J%14*)\$'3\$
,-&.+)(
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7-&)\$%2\$!"#\$-&+P
Household%Production
:*+\$%,'(('%3\$%2\$*%1(+*%05\$7&%516)'%3(\$2&%,\$!"#\$,+-3(\$)*-)\$
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7&%516)'%3
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8-(*'34\$-\$6-&\$-35\$6-&'34\$2%&\$-\$6*'05\$-&+\$-00\$+O-,70+(\$%2\$
*%1(+*%05\$7&%516)'%3
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,-&.+)\$)*+9\$-&+\$3%)\$'36015+5\$'3\$!"#
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=
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Underground%Economic%Activity
:*+\$underground'economy''(\$+6%3%,'6\$-6)'/')9\$*'55+3\$2&%,\$
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Leisure%Time
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Environmental%quality
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=
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-
The%Time%Series%Graph
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5+(6&'J+\$,-6&%+6%3%,'6\$7+&2%&,-36+\$-35\$7%0'69
-
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-
E+()\$8-9\$)%\$5%\$(%\$'(\$)%\$,-.+\$-\$time%series%graph
-
Making%A%Time%Series%Graph
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-
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exports%--35\$J19\$4%%5(\$-35\$(+&/'6+(\$2&%,\$)*+\$&+()\$%2\$)*+\$8%&05\$<
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2&%,\$)*+\$&+()\$%2\$)*+\$8%&05\$)%\$S-3-5'-3\$2'&,(
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GDP%Equals%Expenditure%Equals%Income
!&%((\$5%,+()'6\$7&%516)\$6-3\$J+\$,+-(1&+5\$'3\$)8%\$8-9(P
E9\$)*+\$)%)-0\$+O7+35')1&+\$%3\$4%%5(\$-35\$(+&/'6+(
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+O7+35')1&+\$701(\$'3/+(),+3)\$701(\$4%/+&3,+3)\$+O7+35')1&+\$701(\$3+)\$
+O7%&)(
Aggregate%Income%'(\$+T1-0\$)%\$)*+\$)%)-0\$-,%13)\$7-'5\$2%&\$)*+\$(+&/'6+(\$%2\$)*+\$
2-6)%&(\$%2\$7&%516)'%3\$1(+5\$)%\$7&%516+\$2'3-0\$4%%5(\$-35\$(+&/'6+(\$<8-4+(C\$
'3)+&+()C\$&+3)\$-35\$7&%2')
E+6-1(+\$2'&,(\$7-9(\$%1)\$-(\$'36%,+(\$H'36015'34\$&+)-'3+5\$7&%2')(I\$+/+&9)*'34\$
)*+9\$&+6+'/+\$2&%,\$)*+\$(-0+\$%2\$)*+'&\$%1)71)C\$-44&+4-)+\$'36%,+C\$+T1-0(\$
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!"#\$F\$-44&+4-)+\$+O7+35')1&+\$-35\$F\$-44&+4-)+\$'36%,+
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Why%is%domestic%product%'gross'
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5+7&+6'-)'%3\$%2\$6-7')-0
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Depreciation%'(\$)*+\$5+6&+-(+\$'3\$/-01+\$%2\$2'&,R(\$6-7')-0\$)*-)\$&+(10)(\$2&%,\$
8+-&\$-35\$)+-&\$-35\$%J(%0+(6+36+
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5+7&+6'-)+5\$6-7')-0\$'(\$6-00+5\$gross%investment
Net%investment%F\$4&%((\$'3/+(),+3)\$<5+7&+6'-)'%3
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L%\$-4-'3\$)*+\$&+(10)'34\$/-01+\$%2\$)%)-0\$7&%516)\$'(\$-\$4&%((\$,+-(1&+
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-
The%Expenditure%Approach
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(+&/'6+(\$!C\$-35\$3+)\$+O7%&)(\$%2\$4%%5(\$-35\$(+&/'6+(\$HY<ZI
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Government%Expenditure%on%Goods%and%Services%'(\$)*+\$+O7+35')1&+\$
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(+&/'6+(
=
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Net%Exports%of%goods%and%services%-&+\$)*+\$/-01+\$%2\$+O7%&)(\$,'31(\$
)*+\$/-01+\$%2\$',7%&)(
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-
The%Income%Approach
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7-9\$*%1(+*%05(\$2%&\$)*+\$2-6)%&(\$%2\$7&%516)'%3\$)*+9\$*'&+\$<8-4+(\$2%&\$0-J%1&C\$
'3)+&+()\$2%&\$6-7')-0C\$&+3)\$2%&\$0-35C\$-35\$7&%2')\$2%&\$+3)&+7&+3+1&(*'7
X+\$5'/'5+\$)*+\$'36%,+(\$'3\$)*+\$National'income'and'Expenditure'Accounts'
'3)%\$)8%\$J&%-5\$6-)+4%&'+(
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Q)*+&\$2-6)%&\$'36%,+(DM
Wages,%salaries%and%supplementary%labour%income
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Other%Factor%Incomes
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2&%,\$3%3<2-&,\$13'36%&7%&-)+5\$J1('3+((+(
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'36015+(\$(%,+\$0-J%&\$'36%,+\$2&%,\$(+02<+,70%9,+3)
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Indirect%Tax
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