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Econ 2.docx

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Department
Economics
Course
ECON 305
Professor
Dr.Neri
Semester
Fall

Description
Econ 2  Gross Domestic Product: the total income earned domestically, including the income earned by foreign-owned factors of production.  Market value of all final goods and services produced within an economy.  total expenditure earned on domestically produced goods and services  total income of everyone in the economy  income = expenditure  When you buy something (expenditure) its income for someone else.  GDP = (price X quantity) + (price X quantity)  Currently produced (not used)  When add to inventory it raises GDP but not when they then sell the inventory  Only final goods  Imputed value: estimate of the value of a good that isn’t sold in the marketplace • Imputed rent if you buy a house • No underground  Nominal GDP: value of goods and services measured at current prices.  Real GDP: value of goods and service using a constant set of prices  Not influenced by changes in price.  Base year price X current year quantity  Real GDP = (nominal GDP) / (GDP deflator)  GDPdeflator: implicit price deflator for GDP.  Price of output relative to its price in the base year.  (nominal GDP / Real GDP)  Nominal GDP =(real GDP) X (GDP deflator)  Change base year value throughout the years to keep it up to date and accurate  Y = C + I + G + NX (national income accounts identity.  Consumption: goods and services bought by households (nondurable, durable and service)  Investment: goods bought for future use (business fixed, residential fixed, and inventory) [factories, houses, and inventory]  Government purchases: goods and services bought by federal, state, and local governments.
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