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ECON 102 Lecture Notes - Lecture 3: Gdp Deflator

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bronzelouse659
26 Jan 2016
School
UBC
Department
Economics
Course
ECON 102
Professor
Cheryl F U

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ECON 102 Full Course Notes
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Document Summary

Gross domestic product (gdp): measures the total income of a nation; the most closely watched economic statistic because it is the best measure of a society"s economic well-being. The market value of all final goods and services produced within a country in a given period of time. For an economy as a whole, income must equal expenditure. Y = c + i + g + nx. Consumption: spending by households in goods and services, with the exception of purchases of new housing. Investment: spending in capital-equipment, inventories, and structures, including household spending on new housing. Government purchases: spending in goods and services by local, territorial, provincial, and federal governments. Net exports: the value of a nation"s exports minus the value of its imports; also called the trade balance. Others ways to calculate the gdp are: value added method adding the value added by people to a product or a service.

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Related Questions

Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports:

Ca = 1,500 - 10r c = 0.6 Ip = 2,400 - 50r G = 2,000 T = 1,800 NX = -200

a. Compute the value of the marginal propensity to save.

b. Compute the amount of autonomous planned spending, Ap, given that the interest rate equals 5.

c. Compute the equilibrium level of income, given that the interest rate equals 5.

d. Suppose that autonomous consumption changes by 4 percent of any change in household wealth and that the decline in the housing market in 2006-07 and drop in the stock market in the summer of 2007 reduces household wealth by $750 billion. Compute the decrease in autonomous consumption that results from the decline in household wealth.

e. Calculate the new amount of autonomous planned spending, Ap, and the new equilibrium level of income, given that the interest rate equals 5.

f. Using your answers to parts c-e, compute the value of the multiplier.

1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.

2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.

Year

Good X

Good Y

2005

$3

$6

2006

4

7

2007

4.5

7.5

3. Using the expenditure approach, calculate GDP using the following data.

Item

Amount in dollars (billions)

Consumption

7,600

Consumption of Durable Goods

1,600

Consumption of Non Durable Goods

2,800

Consumption of Services

3,200

Investment

2,750

Fixed Investment

1,000

Government purchases of Goods & Services

1,675

Government Transfer Payments

450

Exports

750

Imports

1,600

GDP Equals

  

4. a. What is the importance of measuring per capita GDP?

b. Why nominal GDP can be misleading?

An economy with zero net exports is described below:

C = 100 + 0.6 (Y 'T)
I p = 70
G = 120
NX = 0
T = 150
The multiplier in this economy is 2.5.
 

A. Find short-run equilibrium output.

Instruction: Enter your response as an integer value.

Short-run equilibrium output: .

B. Economic recovery abroad increases the demand for the country's exports; as a result, NX rises to 80.

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)decreases/ increases to ________ .

C. Assume that foreign economies are slowing, reducing the demand for the country's exports so that NX = -80. (A negative value of net exports means that exports are less than imports.)

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)increases/decreases to ___________ .

D. Which of the following best describes the tendency of recessions and expansions to spread across countries?

1. Lower planned aggregate spending in one nation will reduce the amount of goods it exports abroad, thereby lowering the value of imports for its trading partners, which will reduce its short-term equilibrium output as well.

2. Lower planned aggregate spending abroad means that fewer goods will be exported from a specific nation, leaving more goods available for domestic consumption (C) in that nation, which will increase its short-term equilibrium output.

3. Lower planned aggregate spending abroad will reduce the amount of investment that flows into domestic industries from other countries, thereby reducing domestic short-term equilibrium output.

4. Lower planned aggregate spending in a nation means fewer imports of foreign goods, thereby reducing the short-term equilibrium output of its trading partners through lower net export (NX) values in those nations.