Sunday, January 8, 2017

Chapter 23 Review

I would give this chapter a 1.5/3 in difficulty. This chapter is basically setting the foundation of Macroeconomics by explaining the concepts of GDP (Gross Domestic Product). The concepts are mostly common sense, and only some parts of this chapter (GDP Deflator) were a bit confusing, but that no longer was a problem once I read it over multiple times.

The book first introduces GDP and its definition: the market value of all final goods and services produced within a country in a given period of time. I would say that the book does a good job of explaining the definition because it elaborates on each part of the definition, separating it into their own categories. "Of all", "Final," "Goods and Services", etc.

Then the book goes on to give us an equation, Y= C +I +G+NX. This equation basically defines the components of GDP. Consumption, Investments (as mentioned in the book, doesn't mean financial investments, it actually means purchases of investment goods), government purchases, and net exports.

An interesting part of the GDP is that there are two types. Nominal, and real. The only part at which they differ is choosing a constant price or a current price. In addition, the book introduces the idea of GDP Deflator. I had a little bit of trouble trying to understand how to use it, but the table the book provided helped me comprehend this new concept.

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