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Gross Domestic Product
Expenditure Approach Output Approach Limitations of Model
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Warm-up: Why bother measuring economies. (GDP, GNP, per capita GDP etc
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1. Assess the health of economy 2. Comparison over time
Warm-up: Why bother measuring economies? (GDP, GNP, per capita GDP etc.) 1. Assess the health of economy 2. Comparison over time Has it grown, been constant, declined? 3. International comparisons 4. Aids in forming economic policies.
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GDP Clip from NPR and Slate
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3 ways to calculate GDP Value Added Income Approach
Adding together what each sector of the economy adds, gov., households, business Income Approach Sum all factor payments Wages+interest+rent+profit=GDP Expenditure (spending) C+I+G+(X-M)=GDP
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Some terms. . . . C = Consumer consumption G = Government consumption:
Durable: Non-durable: Services: G = Government consumption: I = Investment Fixed investment: Stock (inventory) Work in progress: X-M = Net Exports
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Expenditure approach then is
GDP = C + I + G + (X-M)
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We’re almost done What are some problems with using GDP as a measure of wellbeing? 1. 2. 3. 4. 5. Gross National Happiness
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