Unit 2 notes ʕ•ᴥ•ʔ

January 28, 2016

GDP: the total market value of all final goods and services produced in a countries borders within a given year

GNP: (gross national product) Gross = total

• the total market value of all final goods and services by citizens of that country on its land or foreign land

What's included in GDP:

C- personal consumption expenditures (65%)

Ig- (gross private domestic investment) [17%]

1 •factory equipment maintenance
2 •factory equipment
3 •construction of houses
4 •unsold inventory of products built in a year

G- Government spending (20%)

Xn- net exports (exports-imports) (2%)

C+Ig+G+Xn
                   


NOT included in GDP:

1. Intermediate goods- a good that requires further processing before their final use (car)

2. Used/ secondhand good
-avoid double counting

3. Purely financial transactions (stocks & bonds)

4. Illegal activity (drugs)

5. Unreported business activity (unreported tips)

6. Transfer payments
-public (SS, VA, welfare)
-private (scholarships)

7. Non market activity
- volunteering
- babysitting
- any work that you perform for yourself

January 27, 2016

Circular flow diagram: it represents the transactions in an economy



Product market: it is the place where goods and services are produced by businesses

Factor market: is the place where house holds sell resources and businesses buy resources

Firms: is an organization that produces goods and services for sale

Household: is a person or a group of people that share their income