tailieunhanh - Lecture Business economics - Lecture 14: Measuring a Nation’s Income - II
After completing this chapter, students will be able to: Learn how gross domestic product (GDP) is defined and calculated, see the breakdown of GDP into its four major components, learn the distinction between real GDP and nominal GDP, consider whether GDP is a good measure of economic well-being. | Review of the previous lecture For an economy as a whole, income must equal expenditure. Gross domestic product (GDP) is a measure of the income and expenditures of an economy. It is the total market value of all final goods and services produced within a country in a given period of time. Nominal GDP values the production of goods and services at current prices. Real GDP values the production of goods and services at constant prices. Some things that contribute to well-being are not included in GDP. The value of leisure. The value of a clean environment. The value of almost all activity that takes place outside of markets, such as the value of the time parents spend with their children and the value of volunteer work. Lecture 14 Measuring a Nation’s Income - II Instructor: Abbas Course code: ECO 400 Lecture Outline Shortcomings of GDP Supply side of the model Shortcomings of GDP Non market transactions: Some productive activities don't take place in the market, and as | Review of the previous lecture For an economy as a whole, income must equal expenditure. Gross domestic product (GDP) is a measure of the income and expenditures of an economy. It is the total market value of all final goods and services produced within a country in a given period of time. Nominal GDP values the production of goods and services at current prices. Real GDP values the production of goods and services at constant prices. Some things that contribute to well-being are not included in GDP. The value of leisure. The value of a clean environment. The value of almost all activity that takes place outside of markets, such as the value of the time parents spend with their children and the value of volunteer work. Lecture 14 Measuring a Nation’s Income - II Instructor: Abbas Course code: ECO 400 Lecture Outline Shortcomings of GDP Supply side of the model Shortcomings of GDP Non market transactions: Some productive activities don't take place in the market, and as the GDP only measures the market value of output, these activities don't show up in the GDP. Thus, GDP understates a nation's total output Example of such activities are labor of carpenters who repair own homes, black markets One exception: Portion of farmers' output that the farmers consume themselves is included in the GDP Leisure: GDP only takes the market value of output, therefore, LEISURE (paid vacation, holidays, leave time), which shows increase of well-being, satisfaction, and 'psychic income' is excluded in the GDP. Shortcomings of GDP Improved product quality: GDP is a quantitative measure, and thus does not capture the value of improvements in product quality Example. a $200 dollar phone costs the same as a $200 dollar phone 10 years ago technological improvements such as greater memory capacities, viewing screens, and enhanced capabilities is not included in GDP The Underground Economy ("black market"): Embedded in the economy is a flourishing and productive underground .
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