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Econ 4.3
Friday, February 12, 1999
Announcements: Homework #2 was
collected at the beginning of class. Attendance was taken.
Lecture notes:
GDP: Gross Domestic Product
- US has the best statistics throughout the
world
- 10,000 students
- $1 million/10,000 = $100 each
- $1 billion/10,000 = $100,000 each
- PSU Budget is larger than a billion dollars
- $1 trillion/10,000 = $100,000,000 each
- GDP = $8,508.9 billion (1998) / 40,000 = $212,722,500
- There can be a rise of over 1 billion dollars during a
period of 50 minutes
Comparison Over Time
- Takes two years money value GDP
- Figure out if it represents Real changes or Price changes
GDP = Current Dollar
- Price that exists at a certain time
- P1Q1 + P2Q2 +
P3Q3 + ... + PnQn = GDP
- Quantity Index: way of measuring things
- Price Index: Puts prices together
- P1998Q1998 = GDP1998
- P1997Q1997 = GDP1997
- Prices have changed (either up or down)
- There is a different GDP due to change in P, change in Q
or a combination between the two
- P =Price
- Q =Quantity
GDP Example
- Base year = 1992
- (GDP/ Implicit Price Deflator)(100) = value of GDP in
constant prices
- 1992 GDP approximately $3,233 billion
- Real value of GDP = (GDP current $/ Price index)(100)
- Real value = ($3,233 billion/100)(100) = $3,233 billion
- 1993 Invented Number
- Current GDP = 3,780 Billion Dollars
- PI = 108.7
- PI = base 100, prices increased by 8.7% during period of
time
- ($3,780 billion/ 108.7)(100) = $3,477 billion
- $574 billion increase, but actually $244 billion
- ($3,780 billion/1,087) = $3,477 billion
- Both statements are correct
- When politicians say economy increased and we are not
better off then before they were in office it is because
they are using different parts of the data
Counting
| |
Bread (P) |
Value Added (V) |
| Farmer Grain |
$0.10 |
$0.10 |
| Grain Elevator |
$0.20 |
$0.10 |
| Miller |
$0.40 |
$0.20 |
| Baker |
$1.10 |
$0.70 |
| Marketing |
$1.30 |
$0.20 |
| Grocery Store |
$1.70 |
$0.40 |
| Total Sales |
$4.80 |
$1.70 |
Measuring GDP:
- Expenditure Approach (mostly used): GDP
= C + I + G + (EX - IM)
- Income Approach: Calculate all income
(Personal Income, Profits for Corporation, Net Factor
Payments, Creation of New Goods and Services that will
become part of Nation's stock capital)
- Investment Component:
- ex: Bryce Jordan Center
- Adaptability for people
- Athletics
- Entertainment
- Academics
- ex: Beaver Stadium Additions (10,000 seats)
- Not adaptable
- Highly specialized capital
- GDP - Depreciation = NDP
- Net Domestic Product (NDP)
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