ECO 1102 Lecture Notes - Lecture 5: Transfer Payment, Gdp Deflator
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ECO 1102 Full Course Notes
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When judging whether the economy is doing well or poorly, it is natural to look at the total income that everyone in the economy is earning that is the task of gdp. Gdp measures 2 things at once: the total income of everyone in the economy and the total expenditure on the economy"s output of goods and services o. An economy"s income is the same as its expenditure because every transacion has 2 paries: a buyer and a seller o. Every dollar of spending by some buyer is a dollar of income for some seller. In the above diagram: in this economy, households buy goods and services from irms; these expenditures low through the markets for goods and services. The irms in turn use the money they receive from sales to pay workers" wages, landowners" rent, and irm owners" proit; this income lows through the markets for the factors of producion.