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Economics

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Economics Combined Version Edwin G. Dolan Best Value Textbooks 4th edition Chapter 19 Measuring Economic Activity Dolan, Economics Combined Version 4e, Ch. 19 – PowerPoint PPT presentation

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Title: Economics


1
  • Economics
  • Combined Version
  • Edwin G. Dolan
  • Best Value Textbooks
  • 4th edition
  • Chapter 19
  • Measuring Economic Activity

2
GDP and Value Added
  • GDP must include only the value of final goods
    and services if it is to measure total production
    without double counting.
  • The value of sales at each stage of production
    can be divided into the value added at that stage
    and the value of purchased inputs.
  • The selling price of the final product (a 100
    table, in this case) equals the sum of the values
    added at all stages of production.

3
Expenditure Approach to GDP
  • Gross domestic product is estimated using the
    expenditure approach.
  • This involves adding together the values of
    expenditures on newly produced final goods and
    services made by all economic units
    CIG(Ex-IM)
  • Net domestic product is derived from gross
    domestic product by excluding the value of
    expenditures made to replace worn-out or obsolete
    capital equipment.

US, 2008
4
National and Domestic Income
  • National and domestic income are measured using
    the income approach.
  • National income is obtain by adding together the
    values of all forms of income earned by a
    countrys residents.
  • Domestic income is derived from national income
    by subtracting receipts of factor income from the
    rest of the world and adding factor income paid
    to the rest of the world.

US, 2008
5
Balance of Payments Accounts
  • Current account transactions consist of imports
    and exports of goods and services, together with
    international flows of factor income and transfer
    payments.
  • Capital and financial account transactions
    consist of international borrowing and lending,
    securities transactions, direct investment, and
    official reserve transactions.
  • If all amounts were measured completely and
    accurately, the current account and financial
    account balances would be equal and opposite in
    sign.
  • In practice, there is a statistical discrepancy
    indicating errors and omissions in measurement.

US, 2008
6
Nominal GDP for a Simple Economy
  • In this simple economy in which only three goods
    are produced, nominal domestic product grew from
    1,000 in 2000 to 1,800 in 2010
  • Because prices also went up, people did not
    really have 1.8 times as many goods and services
    in 2010 as in 2000

Insert image of Table 6A1 from p. 163 of macro 3/e
7
Nominal and Real GDP for a Simple Economy
  • Multiplying 2010 quantities by 2000 prices gives
    the value of 2010 GDP that would have existed if
    prices had not changed.
  • This is called real GDP for 2010.
  • The ratio of nominal GDP to real GDP is the
    implicit price deflator

Insert image of Table 6A2 from p. 164 of macro 3/e
8
Consumer Price Index for a Simple Economy
  • To calculate the consumer price index, divide the
    value of base-year prices valued at current-year
    prices by the value of base-year goods valued at
    base-year prices
  • In this case, the CPI is 170

Insert image of Table 6A3 from p. 165 of macro 3/e
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