Lecture 14 Flashcards
GDP definition
Gross domestic product, or GDP, is the total monetary value of all final goods and services produced in an economy during a given period, usually a year.
Everything wihtin the borders of canada not out
gross national product is every Canadian
Final goods and services and intermediate
Final goods and services are goods and services sold to the final, or end, user.
Intermediate goods and services are goods and services—bought from one firm by another firm
—that are inputs for production of final goods and services.
3 ways to calculate GDP
1) Add up the total value of all final gooods and services produced
2) Add up all spending on domestically produced final goods and services
- You cn find economy size by finding how much is the spending was
3) Add up the total factor income earned by households from firms in the economy
What was the income
Real vs nomial gdp
eal 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
ominal GDP by definition reflects inflation, real GDP uses a GDP deflator to adjust for inflation, thus reflecting only changes in real output.
Chained dollars
Chained dollars: the method of calculating changes in
real GDP using the average between the GDP growth
rate calculated on an early base year and the GDP growth
rate calculated on a late base year
hained dollars is a method of adjusting real dollar amounts for inflation over time, to allow the comparison of figures from different years.
Itslike year ouput * selted yer base price
GDP per capita:
GDP per capita: average GDP per person
Aggregate price leveland what is a market baset?
Where does it go on the Graph
Aggregate price level: a measure of the overall level of
prices in the economy
o measure the aggregate price level, economists
calculate the cost of purchasing a market basket.
– Market basket: a hypothetical set of consumer purchases
of goods and services
It goes on the Y axis and Real gdp goes on the X
Market Basket
o measure the aggregate price level, economists
calculate the cost of purchasing a market basket.
– Market basket: a hypothetical set of consumer purchases
of goods and services
Suppose a typical consumer bought 200 oranges, 50
grapefruit, and 100 lemons over the course of a year
Prefrost
Price of orange is 0.2 price of grape is 0.6 and price of lemon is 0.25
postfrost is 0.4 for organe , 1.0 for grape and 0.45 for lemon
ansswher for prefrost is 95
answer for post frost is 175
what is the Consumer price index for market basket?
How to calculate Market basket?
(Cost of market basket in a given year / cost of market basket in a base year). *100
Price index: the cost of purchasing a given market
basket in a given year, where that cost is normalized so
that it is equal to 100 in the selected base year
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation.
multiply Price x Quantity for each good and then add all those amounts together
What is the inflation defintion and inflation rate definnition and formula?
Inflation defintion is : A rising overall level of prices is inflation.
And Inflation is the change in GDP deflator or change in CPI
and
The inflation rate is the yearly change in consumer price index
Inflation rate: (price level 2 - price level 1 ) / price level 1). *100
Price levels are GDP Deflator
X-Y/Y * 100, where Y represents the consumer price index at the starting point, and X represents the consumer price index of the current year.
Producer price index:
Producer price index (PPI): it’s similar to the CPI, but it measures changes in the prices of goods purchased by
producers
The gdp price deflator whatis it and why do we the formula dn what is the fomrula
And how is it different from aggregate price level?
What does an icnrease / decrease in gdp deflator indicate
The GDP price deflator measures the changes in prices for all of the goods and services produced in an econom
An increase in nominal GDP may just mean prices have increased, while an increase in real GDP definitely means output increased. The GDP deflator is a price index, which means it tracks the average prices of goods and services produced across all sectors of a nation’s economy over time.
So a increased GDP deflator means prices are increasing without the same level of incrasing in ouput. But if re
When the GDP deflator rises, the change in the prices of goods in the Gross Domestic Product gets bigger. This means that the aggregate price increase is higher than the price increase that happened during the base year.
GDP deflator that measures the
price level by calculating the ratio of nominal to real GDP.
– The GDP deflator for a given year is 100 times the ratio of
nominal GDP to real GDP in that year.
nominaml gdp/real gdp ) *100
GDP deflator is a measure of all products and services of the country (including non-consumer goods and services), while the CPI uses only consumer goods.
An increase in gdp defltor indciatees inflsiton while decrease indicates deflation
what does the cpi measure
The CPI measures the cost of the market basket of a
typical urban family
GDP Spending formula
Y = C+I+G+X-IM
remember that Y (OUput) is the final goods and services and on the right side is the aggregate spending
