EC4004Lecture 1

Growth Matters

<1>

<2>Setup

Recap<3>

Growth Matters

<1>Setup

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</1>Setup

<2>Recap

1. Economic Models2. Supply and Demand

3. Measuring the Macroeconomy (Handout)

</2>Recap

<3>Growth Matters

GDP: Sum of all final goods and services produced in the economy

Growth rate of real GDP for year t

= (( Yt− Yt−1)/ Yt−1)− 1

Multiply by 100 to get the growth rate of real GDP in

percent per year.

Example: Y2006=105; Y2005=100

Growth Rate = 105-100/100-1*100 =5%

National Income Accounting

Nominal GDP measures the Euro (or dollar, etc.) value of all the goods and services that an economy produces during a specified period, such as a year.

Flow variable - it measures the Euro amount of goods produced per unit of time, such as a year.

GDP in current Euros

•Calculating Real GDP

•Multiply each year’s quantity of output of each good by the price of the good in a base year.

•GDP in constant Euros

•Chain-weighted real GDP

(nominal GDP)/(implicit price level) = real GDP

or

implicit price level = (nominal GDP)/(real GDP)

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</3>Growth Matters

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Growth TheoryRead Barro Chapter 3