EC4004 Lecture 1 Lecture 1 Growth Matters

<1> <2> Setup Recap <3> Growth Matters

<1> Setup

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</1> Setup

<2> Recap

1. Economic Models 2. Supply and Demand 3. Measuring the Macroeconomy (Handout)

</2> Recap

<3> Growth Matters

GDP: Sum of all final goods and services produced in the economy

GDP: Sum of all final goods and services produced in the economy

Growth rate of real GDP for year t = (( Yt− Yt−1)/ Yt−1)− 1 Multiply by 100 to get the growth rate of real GDP in percent per year.

Example: Y2006=105; Y2005=100 Growth Rate = 105-100/100-1*100 =5%

National Income Accounting Nominal GDP measures the Euro (or dollar, etc.) value of all the goods and services that an economy produces during a specified period, such as a year. Flow variable - it measures the Euro amount of goods produced per unit of time, such as a year. GDP in current Euros

National Income Accounting

Nominal GDP measures the Euro (or dollar, etc.) value of all the goods and services that an economy produces during a specified period, such as a year.

Flow variable - it measures the Euro amount of goods produced per unit of time, such as a year.

GDP in current Euros

Calculating Real GDP Multiply each year’s quantity of output of each good by the price of the good in a base year. GDP in constant Euros Chain-weighted real GDP

Calculating Real GDP

Multiply each year’s quantity of output of each good by the price of the good in a base year.

GDP in constant Euros

Chain-weighted real GDP

(nominal GDP)/(implicit price level) = real GDP or implicit price level = (nominal GDP)/(real GDP)

(nominal GDP)/(implicit price level) = real GDP

or

implicit price level = (nominal GDP)/(real GDP)

www.gapminder.org

www.gapminder.org

</3> Growth Matters

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Next Time Growth Theory Read Barro Chapter 3