Chapter 10 measuring macroeconomic activity
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1) The document discusses key macroeconomic indicators including Gross Domestic Product (GDP), the Consumer Price Index (CPI), and the unemployment rate. 2) GDP is the total value of final goods and services produced domestically in a year, and can be measured by total expenditures or total income. 3) The CPI is published by the Bureau of Labor Statistics and used to measure inflation and changes in the cost of living over time based on prices of goods in a typical consumer's basket.
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Okay, let's solve this step-by-step:
Given: TC = 4000 + 5Q + 10Q2
Quantity (Q) = 10 units
1) Total Fixed Cost (TFC) = 4000 (Given fixed cost)
2) Average Fixed Cost (AFC) = TFC/Q
= 4000/10 = 400
3) Total Variable Cost (TVC) = 5Q + 10Q2
= 5(10) + 10(10)2 = 50 + 1000 = 1050
4) Average Variable Cost (AVC) = TVC/Q
= 1050/10 = 105
5) Average Total Cost (ATC) = TC/Q
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2. Producers must determine production levels, capacity, input combinations, and prices to maximize profits and minimize costs.
3. Isoquants illustrate the different combinations of inputs that produce the same output amount, and become curved as substitutability decreases.
4. Marginal product and returns to scale analysis helps producers optimize input use in the stages of increasing, constant, and diminishing returns.
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This document discusses key economic concepts related to production, costs, and profit maximization. It defines factors of production and their relationship to output. It also defines fixed costs, variable costs, marginal cost, total revenue, and marginal revenue. Finally, it discusses the concepts of break even point and profit-maximizing quantity, where marginal cost equals marginal revenue.
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2. It outlines short run, long run, and very long run periods and explains factors of production, total product, average product, and marginal product.
3. It describes the three stages of production - increasing, constant, and diminishing returns - and the law of diminishing marginal returns as it relates to a variable input factor.
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It begins with an introduction to the theory of production, defining it as the process of converting inputs into outputs. It then discusses the production function and how it represents the relationship between inputs and outputs.
The main body of the document is dedicated to explaining the four factors of production: land, labor, capital, and entrepreneurship. It provides examples and definitions for each factor.
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Okay, let's solve this step-by-step:
Given: TC = 4000 + 5Q + 10Q2
Quantity (Q) = 10 units
1) Total Fixed Cost (TFC) = 4000 (Given fixed cost)
2) Average Fixed Cost (AFC) = TFC/Q
= 4000/10 = 400
3) Total Variable Cost (TVC) = 5Q + 10Q2
= 5(10) + 10(10)2 = 50 + 1000 = 1050
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= 1050/10 = 105
5) Average Total Cost (ATC) = TC/Q
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2. Producers must determine production levels, capacity, input combinations, and prices to maximize profits and minimize costs.
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The document discusses national income accounting and how it was developed in response to the Great Depression. It explains how GDP, GNP, and other measures are calculated and what they represent. Specifically, it outlines the three approaches to calculating GDP - output, income, and expenditure - and how GDP is used to measure a country's economic performance and standard of living. However, it also notes some limitations of GDP as an indicator.
MACROECONOMICS.pptx
National income measures the total value of goods and services produced in an economy over a period of time. It is important for economists to measure national income to assess economic growth, changes in living standards, and income inequality. National income can be measured using the expenditure approach, income approach, and value-added approach. The expenditure approach defines GDP as the total final expenditures by consumers, investors, the government, and net exports. The income approach defines GDP as the sum of all incomes received by producing factors. The value-added approach defines GDP as the sum of the value added from all sectors of the economy.
Chap 2.pptx
macroeconomisc studies that help you understand the economy as a whole and therefore give you a rough idea that you should quit this.
Quiz, week #2Measuring macro outcomesMy expectations are that .docx
Quiz, week #2
Measuring macro outcomes
My expectations are that it will take a page or more to answer the two questions below
1.Are people worse off when the price level rises as fast as their income? Why do people often feel worse off in such circumstances?
2.Identify two groups that benefit from deflation and two that lose.
Chapter 5
1.NATIONAL-INCOME ACCOUNTING
This chapter introduces national-income accounting. The data generated by national-income accounting is used to track the economy’s performance. This chapter provides a framework on which future chapters will build. The three questions that are to be kept in mind while reviewing the chapter are:
1. How much income is being produced? What is it being used for?
2. How much income is being generated in the marketplace?
3. What’s happening to prices and wages?
OUTLINE
I. Introduction
A. Government only wants to tackle problems that it can measure.
B. The Great Depression resulted in a commitment to national income accounting.
1. Definition: National-Income Accounting – The measurement of aggregate economic activity, particularly national income and its components.
2. Developed by Simon Kuznets and the U.S. Department of Commerce, it answers questions such as:
• How much output is being produced? What is it being used for?
• How much income is being generated in the marketplace?
• What’s happening to prices and wages?
II. Measures of Output
A. Gross Domestic Product (GDP) (Figure 5.1a and b, Table 5.1)
1. Definition: Gross Domestic Product (GDP) – The total dollar value of final output produced within a nation’s borders in a given time period.
2. The use of prices to value market output allows us to summarize output activity and compare outputs of one period with that of another.
3. GDP vs. GNP
• GNP refers to output produced by American-owned factors regardless of location.
• GDP refers to output produced within America’s borders.
• GDP is geographically focused, including all output produced within a nation’s borders regardless of whose factors of production are used to produce it.
• For example, Apple’s output in Singapore ends up in Singapore’s GDP; the cars produced at Honda’s Ohio plant are counted in US GDP.
4. International Comparisons
• The geographic focus of GDP facilitates international comparisons of economic activity.
• The World View in chapter 2 illustrates a comparison of GDP values.
5. GDP per Capita
• Definition: GDP per Capita - Total GDP divided by total population: average GDP.
• GDP per capita is commonly used as a measure of a country’s standard of living.
• Disparities in per capita GDP mean that people in low-income countries have little access to telephones, televisions, paved roads, schools, and healthcare.
• World View: “Global Inequalities”
Over 1.3 billion people live in nations the World Bank calls “low-income”. The average income in low-income nations is only $1,500. Behind sta ...
National income accounting
The document discusses different models of the circular flow of income and expenditure, including two-sector, three-sector, and four-sector models. It also defines key terms related to national income accounting such as GDP, GNP, NDP, and methods for calculating real GDP. The relationship between expenditure, output, and income methods for measuring GDP is explained. The document also distinguishes between GDP and GNP as well as defines personal and disposable income.
Lecture 2 econ110 2015 (1)
This document provides an overview of measuring gross domestic product (GDP). It discusses three main approaches to measuring GDP - the production approach, expenditure approach, and income approach. The expenditure approach sums consumption, investment, government spending, and net exports. GDP can be measured in nominal or real terms, with real GDP adjusting for inflation. While GDP is a key economic indicator, it has shortcomings in capturing overall well-being.
Econ214 macroeconomics Chapter 5
GDP is the total market value of final goods and services produced within an economy in a given year. It is measured using the production, income, and expenditure approaches. GDP components include consumption, investment, government spending, and net exports. Real GDP controls for inflation while nominal GDP is the current dollar value. The business cycle includes periods of expansion and recession as real GDP rises and falls.
national income
National income is the total value of final goods and services produced in a country in a year. It can be measured using the value added method, income method, or expenditure method. The value added method sums the value added by each producing unit. The income method sums all factor incomes including wages, rent, interest, and profit. The expenditure method sums all final expenditures including household consumption, government spending, investment, and net exports. To accurately measure national income, intermediate goods must be excluded and issues like double counting must be addressed. National income can be measured at current or constant prices.
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Quiz, week #2Measuring macro outcomesMy expectations are that .docx
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Chapter 10 measuring macroeconomic activity
- 1. CHAPTER 10 Measuring Macroeconomic Activity
- 2. INTRODUCTION
- 3. Learning Objectives What will you learn from this module? Gross Domestic Product (GDP) the Consumer Price Index (CPI) the Unemployment Rate 2-3
- 4. CHAPTER 10 Measuring Macroeconomic Activity
- 6. Gross Domestic Product 4-6 • Two definitions: • Total expenditure on domestically-produced final goods and services. • Total income earned by domestically-located factors of production. • For more information on “Gross Domestic Product” • https://www.youtube.com/watch?v=mjJmo5mN5yA
- 7. Why expenditure = income 4-7 In every transaction, the buyer’s expenditure becomes the seller’s income. Thus, the sum of all expenditure equals the sum of all income. Definition of Value Added: A firm’s value added is the value of its output minus the value of the intermediate goods the firm used to produce that output.
- 8. Final goods, value added, and GDP 4-8 • GDP = value of final goods produced = sum of value added at all stages of production • The value of the final goods already includes the value of the intermediate goods, so including intermediate goods in GDP would be double-counting.
- 9. The expenditure components ofGDP 4-9 1. Consumption 2. Investment 3. Government spending 4. Net exports
- 10. 1. Consumption 4- • the value of all goods and services bought by households which Includes: • durable goods last a long time ex: cars, home appliances • non-durable goods last a short time ex: food, clothing • Services work done for consumers ex: dry cleaning, air travel
- 11. 2. Investment (I) 1: spending on [the factor of production] capital 2. spending on goods bought for future use • Example (assumes no depreciation): • 1/1/2003: economy has $500b worth of capital • during 2003: investment = $37b • 1/1/2004: economy will have $537b worth of capital 4-
- 12. 3. Government spending(G) 2- • G includes all government spending on goods and services. • G excludes transfer payments (e.g, unemployment insurance payments), because they do not represent spending on goods and services. • What is Net exports (NX = EX - IM) • value of exports (EX) minus imports (IM)
- 13. 4. Net Export 2- • What is Net exports (NX = EX - IM) • value of exports (EX) minus imports (IM)
- 14. An important identity 4- Y = C + I + G + NX where Y = GDP = the value of total output C + I + G + NX = aggregate expenditure
- 15. GDP: An important concept • We have now seen that GDP measures • total income • total output • total expenditure • the sum of value-added at all stages in the production of final goods. 2-
- 16. GNP vsGDP • Gross National Product (GNP): total income earned by the nation’s factors of production, regardless of where located • Gross Domestic Product (GDP): total income earned by domestically-located factors of production, regardless of nationality (GNP – GDP) = (factor payments from abroad) – (factor payments to abroad) 2-
- 17. Real vs NominalGDP 2- • GDP is the value of all final goods and services produced. • Nominal GDP measures these values using current prices. • Real GDP measure these values using the prices of a base year. • For more information on “Real vs Nominal GDP” • https://www.youtube.com/watch?v=rGqhTQyY6g4
- 18. Real GDP controls forinflation 2- • Changes in nominal GDP can be due to: • changes in prices • changes in quantities of output produced • Changes in real GDP can only be due to changes in quantities, • because real GDP is constructed using constant base-year prices.
- 19. CHAPTER 10 Measuring Macroeconomic Activity
- 21. Consumer Price Index(CPI) 2- • A measure of the overall level of prices • Published by the Bureau of Labor Statistics (BLS) • Used to track changes in the typical household’s cost of living • adjust many contracts for inflation • allow comparisons of dollar figures from different years • For more information on “Measuring Inflation” • https://www.youtube.com/watch?v=0jJKjgE3qfE
- 22. How the BLS constructs theCPI 1. Surveys consumers to determine composition of the typical consumer’s “basket” of goods. 2. Every month, collects data on prices of all items in the basket; compute cost of basket 3. CPI in any month equals 100 Cost of basket in that month Cost of basket in base period 2-
- 23. CHAPTER 10 Measuring Macroeconomic Activity
- 24. 2-24 RECAP On Key Terms and Concepts
- 25. Main terms andconcepts • GDP • GDP Deflator • CPI 4-