UB ECO 182 - chapter 8-3 (13 pages)

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chapter 8-3



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chapter 8-3

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Pages:
13
School:
University at Buffalo-SUNY
Course:
Eco 182 - Intro To Microeconomics
Intro To Microeconomics Documents

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Chapter 4 8 Measuring the Economy s Performance measures the level of economic activity measures standard of living measures Economic Growth The Circular Flow Diagram a visual model of the Economy is the mechanism that the The main way in which resources are distributed in the U S are through assume no government initially Two types of actors 1 own and sell Buy 2 sell Buy Two markets 1 2 Since every dollar a buyer spends is a dollar of for the seller this implies that Total earned by households on households Goods and Services Total by The value of the goods produced is called Thus GDP measures both 1 2 Gross Domestic Product GDP is the 1 value of all 2 goods and services 3 4 in a given period quarterly or annually 1 Goods are valued at their prices so that all goods are measured in the units Problem is that things that don t have a market value are from GDP This includes 1 Goods and services that are produced and 2 Goods and services that are sold 2 Final goods intended for the user Intermediate goods used as in the production of other goods GDP only includes goods they already embody the value of the used in their production counting intermediate goods results in Example 3 Produced only includes goods Excludes goods 4 Domestically Within a Country regarless of who Excludes even if produced by 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 You hire a maid to clean your house You mow your own lawn You buy a new BMW that was built in Ohio You buy an IBM computer that was made in China You buy a 2006 Subaru Tribeca for 20 000 You buy stock issued by Google Summary Goods Excluded From GDP 1 2 3 4 5 GDP as a measure of Economic wellbeing Higher GDP means higher and higher This may imply that an economy has more money to spend on GDP is usually related with other measure of Quality of life such as GDP is an imperfect measure of wellbeing Limitations It ignores things like 1 The quality of the 2 of Income Thus GDP may well being 3 time 4 production But GDP may also well being Many countries are looking for a better measure of Society s well being that incorporates many measures of well being GNH Gross National Happiness value is proposed to be an index function of the total average per capita of the following measures 1 Economic Wellness 2 Environmental Wellness 3 Physical Wellness 4 Mental Wellness 5 Workplace Wellness 6 Social Wellness 7 Political Wellness How is GDP measured GDP measures both



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