UW-Madison ECON 102 - The Real GDP (3 pages)

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The Real GDP

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The Real GDP


The Real GDP Lecture

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University of Wisconsin, Madison
Econ 102 - Principles of Macroeconomics
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Econ 102 1nd Edition Lecture 2 Outline of Last Lecture I Components and Measurement of Aggregate Output II Macroeconomic Data Aggregates III Macroeconomic Data The Circular Flow Outline of Current Lecture I Real GDP II 5 2 The Production Approach III Putting It All Together The GDP Equation Current Lecture I Real GDP a the amount of stuff produced in the economy b Aggregate adding up unlike objects ex chairs lectures apples oranges using base year value price i The base year should be close to the production year ii This will make sure that the goods are reflected with price weights of the time 1 EX no plasma TVs in 1940 2 Best way to do that is Chain weight a which uses previous and current years as the base year b use the average of both 3 Q2012 prices from 2011 4 GDP2012 prices from 2012 5 6 Q2013 prices from 2012 7 GDP 2013 prices from 2013 a each year is linked to the year before it and after it II 5 2 THE PRODUCTION APPROACH MEASURING A NATION S MACROECONOMIC ACTIVITY USING GROSS DOMESTIC PRODUCT continued from last lecture a Economists divide GDP into four broad categories each corresponding to different types of purchases represented in GDP i Consumption expenditures purchases by households 1 How much of computer production went to households 2 Anything purchased by a household except for housing itself 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 a housing is an investment buy maintain sell live off of profit for retirement 3 Education is considered consumption ii Private investment expenditures purchases by firms that are a factor of production 1 any spending by a firm must be optimistic about the future 2 How much of computer production went to firms 3 Purchases of newly produced goods and services by firms 4 GDP consists of these three mostly the first a First there is spending on new plants and equipment during the year b Second newly produced

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