Macro Econ
Business Economics 201
Chapter 23: Measuring a Nation’s Income
Macroeconomics: a study of the nation’s economy as a whole with a goal of explaining the changes that affect many households, firms, and markets simultaneously
GDP: measures the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services income must equal expenditure every transaction has a buyer and seller
Can be computed by adding up expenditure by households or total income paid by firms
GDP is the market value of all final goods and services produced within a country in a given time period
Adds many different kinds of products to a single measure of economic activity
Includes market value of housing services providing by economy’s stock of housing
GDP only includes the value of a final good
Doesn’t include transactions involving items produced in the past
Usually measured the value of production in a specific time interval
Components of GDP
Consumption: spending by households with the exception of purchasing new houses
Investment: the purchase of goods that will be used in the future to produce more goods and services
Government purchases by local, state, and federal governments
Net exports: the foreign purchases of all domestically produced goods minus the purchase of foreign goods
Real v. Nominal
If total spending rises from one year to the nest then one of two things must be true
Economy is producing a larger output of goods and services
Goods and services are being sold at higher prices
REAL GDP: the production of goods and services valued at constant prices, designate a base year to provide a basis for comparing quantities in different years, adjusted for inflation
Nominal GDP: the production of goods and services valued at current prices
Chapter 24: Measuring the Cost of Living
Consumer Price Index: a measure of the overall cost of the goods and services bought by a typical consumer
TO CALC:
Chapter 23: Measuring a Nation’s Income
Macroeconomics: a study of the nation’s economy as a whole with a goal of explaining the changes that affect many households, firms, and markets simultaneously
GDP: measures the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services income must equal expenditure every transaction has a buyer and seller
Can be computed by adding up expenditure by households or total income paid by firms
GDP is the market value of all final goods and services produced within a country in a given time period
Adds many different kinds of products to a single measure of economic activity
Includes market value of housing services providing by economy’s stock of housing
GDP only includes the value of a final good
Doesn’t include transactions involving items produced in the past
Usually measured the value of production in a specific time interval
Components of GDP
Consumption: spending by households with the exception of purchasing new houses
Investment: the purchase of goods that will be used in the future to produce more goods and services
Government purchases by local, state, and federal governments
Net exports: the foreign purchases of all domestically produced goods minus the purchase of foreign goods
Real v. Nominal
If total spending rises from one year to the nest then one of two things must be true
Economy is producing a larger output of goods and services
Goods and services are being sold at higher prices
REAL GDP: the production of goods and services valued at constant prices, designate a base year to provide a basis for comparing quantities in different years, adjusted for inflation
Nominal GDP: the production of goods and services valued at current prices
Chapter 24: Measuring the Cost of Living
Consumer Price Index: a measure of the overall cost of the goods and services bought by a typical consumer
TO CALC: