UB ECO 182DIS - chapter 8 econ (14 pages)

Previewing pages 1, 2, 3, 4, 5 of 14 page document View the full content.
View Full Document

chapter 8 econ



Previewing pages 1, 2, 3, 4, 5 of actual document.

View the full content.
View Full Document
View Full Document

chapter 8 econ

21 views


Pages:
14
School:
University at Buffalo-SUNY
Course:
Eco 182dis - Intro To Microeconomics

Unformatted text preview:

Chapter 4 8 Measuring the Economy s Performance Level of GDP measures the level of economic activity GDP per capita GDP population measures standard of living measures Economic Growth The Circular Flow Diagram a visual model of the economy Economy is the mechanism that distributes the scarce resources and goods services The main way in which resources are distributed in the U S are through markets assume no government initially Two types of actors 1 Households own and sell resources Buy 2 business sell Buy Two markets 1 Resource market 2 Business Households Resource Market Since every dollar a buyer spends is a dollar of income for the seller this implies that Total spending income earned By households on households Goods and Services Total by The value of the goods produced is called GDP Thus GDP measures both 1 Spending on goods and Services 2 Income earned producing goods and services Gross Domestic Product GDP is the market 1 value of all final 2 goods and services produced 3 domestically 4 in a given period quarterly or annually 1 Goods are valued at their market prices so that all goods are measured in the same units Problem is that things that don t have a market value are excluded non market activities from GDP This includes 1 Goods and services that are produced at home and mowing lawn home child care 2 Goods and services that are sold in the black market unreported activity 2 Final goods intended for the final user Intermediate goods used as ingredients in the production of other goods GDP only includes final goods they already embody the value of the intermediate goods used in their production counting intermediate goods results in double counting Example flour bought by bakery not included in GDP Flour bought by household should be included 3 Produced only includes newly produced goods Excludes old goods 4 Domestically Within a Country regarless of who produces the good Excludes imported goods even if produced by a domestic a American company producer Important questions to ask are 1 Does this activity generate new economic activity in the domestic economy 2 Has it already been counted 3 Can it be measured In Class Example Say whether or not the following transactions would be counted in 2010 GDP 1 2 3 4 5 6 7 McDonalds buys buns for it s Big Macs Excluded intermediate You hire a maid to clean your house yes You mow your own lawn no home production You buy a new BMW that was built in Ohio Yes You buy an IBM computer that was made in China no You buy a 2006 Subaru Tribeca for 20 000 No used You buy stock issued by Google No no goods or services exchanged savings or investments not counted in GDP Summary Goods Excluded From GDP 1 Intermediate 2 Used goods 3 Imported goods 4 Financial transactions 5 Non market activities GDP as a measure of Economic wellbeing Higher GDP means higher income



View Full Document

Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...
Login

Join to view chapter 8 econ and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view chapter 8 econ and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?