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Tuesday, 6/09/15, Day 6 Do you know where your assigned textbooks are? *United States Government: Democracy in Action $89.00 *Economics: Principles and Practices $118.00 1-“Measuring the Nation’s Output and Income” 2- “Business Cycles and Fluctuations” 3- “Bring your “FINAL” study materials to class this Friday” Measuring the Nation’s Output and Income 1-What is “macroeconomics”? The branch of economics that deals with the economy as a whole, using aggregate measures of output; income; prices and employment. 2-What is gross domestic product? The most comprehensive measure of national output. Multiply all of the final goods and services produced in a 12 month period by their prices and then add them to get the total dollar value. All final goods and services that are sold in a year Gross Domestic Product The total dollar value of all final goods and services produced within a country’s borders in a given year. https://www.stlouisfed.org/education/economic-lowdown-video-series/episode-7gross-domestic-product 3-What things may be excluded from GDP? In each case, give a brief explanation why. a-Intermediate products, or goods that are used to make other products that are counted in GDP: tires on a new car; paper used to make a newspaper [replacement tires are counted in GDP. Flour and sugar used at home to bake are counted; those used in a bakery to make a baked good for sale are not. b-Second hand sales [used goods…only original sale is counted in GDP. c-Nonmarket transactions: when you mow your lawn or do household repairs: only count when done for pay outside the home. d-Underground economy: drugs, gambling; flea markets; garage sales [difficult to trace] 4-What are the limitations of GDP? 1-tells us nothing about the composition of the output, or what is being produced 2-Impact of production on quality of life: environment, health 3-Some GDP is produced to control activities that give us little utility or satisfaction: money spent to fight crime 5-List the five measures of national income. a. Gross National Product: The dollar value of all final goods and services produced in one year with labor and property owned by a country’s residents. b. Net National Product: GNP less depreciation charges for wear and tear on capital equipment. c. National income: Income that is left after all taxes are subtracted from the Net National Product. d. Personal Income: Total amount of income going to the consumer sector before income taxes are paid. e. Disposable Personal Income: Personal income less income taxes. 6-What are the four sectors of the economy? Explain each one briefly. a. Consumer sector: Households b. Investment sector: Businesses c. Government sector: Local. state and federal d. Foreign sector: All consumers and producers outside the United States 7-What is the output-expenditure model? Shows how GDP is equal to the sum of aggregate demand by the consumer, investor, government and foreign sectors. GDP= C + I + G + [X-M] How GDP is calculated: GDP= Consumer purchases + Investments by businesses + Government purchases + [Exports – Imports]