ECON 102 1st Edition Lecture 14 Outline of Last Lecture 1 The Expanded Circular Flow Diagram 2 The National Accounts Outline of Current Lecture I GDP and CPI Tracking the Macroeconomy a Solving problems b Key terms Current Lecture Problem 1 Expanded Circular Flow Graph 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 Using the graph solve the questions 1 2 What is the value of GDP in Macronia 800 Wages profit interest rent What is the value of disposable income Disposable Income Consumpution Savings o 510 200 710 Problem 2 1 Calculate GDP as the value added in production Add all of the Value of output s together after subtracting each output by its input 200 50 35 115 115 came from the cost of inputs from the pizza company subtracted from the value of output which is 200 35 50 85 200 85 115 2 Calculate GDP as the spending on final goods Because pizza is the final good in this economy the only price we would need to take is the value of output from the Pizza company 200 If done correctly every way to calculate a market s GDP should all create the SAME ANSWER Real GDP The total value of the final goods and services produced in the economy during a given year calculated using the prices of a selected base year Nominal GDP The value of all final goods and services produced in the economy during a given year calculated using the prices current in the year in which the output is produced o Except in the base year real GDP is not the same as nominal GDP output valued at current prices GDP per capita The measure of the average GDP per person o GDP per capita GDP Population It is not by itself an appropriate policy goal Does not tell us how growth is spread out Aggregate Price Level The measure of the overall level of prices in the economy o To measure the aggregate price level economists calculate the cost of purchasing a market basket Price Index The ratio of the current cost of that market basket to the cost in a base year multiplied by 100 Cost of market basket in a given year Cost of market basket in a base year X 100
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