Class notes
ECON 352-Chapter 2 Notes
- Course
- ECON 352
- Institution
- University Of Southern California
ECON 352-Chapter 2 Notes
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Chapter 2 NotesThe Measurement and Structure of National Economy
1) GDP: the market value of all measurable final goods and services produced domestically
○ GDP today = $23T
○ GDP per capita: over $60,000
● Distinction between nominal GDP & real GDP:
○ Nominal GDP is always larger than real GDP because it doesn’t take into account
of inflation
○ Common price or base price: changes every 10 years
○ 2012: 100 CPI
○ 2023: 155 CPI
○ Today’s GDP = $23T
○ Real GDP = (nominal GDP/CPI of today)*CPI of base year (100)
○ Real GDP of 2023 = ($23T/155)*100
● 3 ways to measure:
1. Sum of spending by the following sectors:
● GDP = C + I + G + X - M
● C: households spending
● I: firms
● G: government
● X: export
● M: import (produced in other countries so subtract it for GDP)
2. Sum of value added by producers:
● Value added = value of final goods - value of intermediary goods
3. Sum of income:
● Labor income: over 70% of income
● Capital income: over 20% of income
● Indirect taxes: 10%
2) GNP
● Nominal GDP = current dollar GDP = dollar GDP
● Real GDP = GDP in terms of goods = GDP in constant dollar = GDP adjusted for
inflation
● Distinction between GNP & GDP:
○ GNP is the market value of all measurable final goods & services produced by
citizens (national) outside of their own country
■ GDP = GNP - NFP
● NFP: net factor payments = income paid to domestic factors by
foreigners - income paid to foreigners by domestic economy
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