ECO 1102 Lecture Notes - Lecture 2: Gdp Deflator, Income Approach, Time Series

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Document Summary

The economy"s income and expenditure: gdp measures, circular flow diagram. Total expenditure on the economy"s output of goods and services. All transactions between households and firms in a simple economy. These expenditures flow through the markets for good and services. Firms use the money they receive to pay workers wages, landowner"s rent, and firm owner"s profits. This income flows through the market for the factors of production: computing gdp. Adding up the total income paid by firms. Gdp is the same for expenditures and income: exceptions. Some goods and services are bought by governments, firms. Regardless each transaction deals with a buyer and seller (proves why expenditures and income is the same) All items produced in the economy and sold legally in markets (everything) Any items produced and consumed at home (home garden vegetables) May lead to paradoxical results: gdp can underestimate the true amount of productive activity in the economy, final , what gdp counts.

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