ECON 2305 Lecture 13 Outline of Last Lecture I Inflation II Price Index Outline of Current Lecture I Circular Flow II GDP Current Lecture Circular Flow consists of product and factor markets Product market provided by businesses final consumer goods total monetary value of all final goods and services Factor market provided by households labor land capital entrepreneurship total income wages rents interest and profits What is GDP Total market value of all final goods and services produced during a year by factors of production located within a nation s borders It includes market value final goods and services within borders and timeframe Excluded financial transactions Buy sell securities stocks bonds Private transfer payments funds from parents gifts etc Government transfer payments social security benefits Used goods already included the first time Household production for their own personal use Legal underground transactions that are not reported Illegal underground transactions GDP limitations Excludes non market transactions No set standard for legal and illegal activities These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Quantity and not quality Calculating GDP through Expenditure s Approach GDP C G I X C Consumer expenditures I Investment G Government Expenditures X Net exports GDP Components Consumption Durable Non durable Services Largest component of GDP Government State Local and Federal Investment Capital goods Factories Plants Inventories Most volatile many variables like technology electricity automobile computer chips interest rates and taxes
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