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Macroecons 1 - Coggle Diagram
Macroecons 1
GDP = Gross Domestic Product
Measures the total production, income, and expenditures of an economy.
measured using market values, not quantities
Market Values
Goods & services bought & sold in the markets
Cannot add together quantities of every good & service
Measure production by taking value in dollar terms
Only value of final goods are recorded
Intermediate goods not included
Includes tangible & non tangible goods
Includes current production only
Includes all newly produced
No second hand sales are added
Only includes "legal production
The production must occur within (usually) a year or a quarter
Measuring GDP
3 approaches to measure economic performance
Production (value-added) approach
The sum of value of all goods - Cost of goods used in the production process.
Additional value of output produced, subtract the value of all intermediate goods used in the production
Income approach
The sum of the income generated in the production of G&S
Includes profits, wages, net interest
Expenditure approach
Y = C+I+G+NX
Consumption
= spending by
households
on G&S except new house
Income
= spending on new capital equipment, inventories & structures including new house
Government
= spending on G&S by local, state, & federal government includes roads, public services, public servants. Transfer Payment (gov. to individuals) like unemployment benefits are not included in GDP
Net Exports
= Exports (out) - Imports (in)
Income = Expenditure = Production
A dollar spend by a buyer = A dollar income for a seller
Any output produced (product approach) is purchased by someone (expenditure approach) and results in income to someone (income approach)
GDP does not include
Household Production = produced for themselves (home cooking, farming for themselves)
The Underground Economy = Illegal transaction
NDP = Net Domestic Product
measuring GDP and subtracting the value of depreciation on capital equipment.
GNI = Gross National Income
GDP + income generated overseas by the country's residents - income generated in the country by non residents
Real vs Nominal