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Macroeconomics 10.docx

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ECON 201

Macroeconomics Chapter 10  Microeconomics: the study of how households and firms make decisions and how they interact in markets.  Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment, and economic growth.  GDP: measures the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services.  For an economy as a whole, income must equal expenditure.  Adollar spent by a buyer is income for a seller.  Gross domestic product: (Y) the market value of all final goods and services produced within a country in a given period of time.  Market value changes with value of the goods  Rent (implied amount if not paid), exclude illicit goods, and things made at home  GDP from goods can change if relationship changes between buyer and seller (marriage)  Additions to inventory add to GDP as “final” goods, but if it is used to make a final good it is intermediary and counted later.  Produced! Not selling of old goods  Modify for seasonal changes.  4 components • C – consumption • I – investment • G – government purchases • NX – net exports  Consumption: spending by households on goods and services, with the exception of purchases of new housing.  Investment: spending on capital equipment, inventories, and structures, includi
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