Principles

of Macroeconomics
Lecture 2
Gross Domes6c Product
part 3

Professor Nilss Olekalns
1

What is Economic Ac1vity?

Na1onal Income Accoun1ng
Value of Production over a Period = Y

Sold Domestically
Cd + G + I

Sold to Other Countries

asfrom
Exports
Receives tax
rms and households
X

Y = Cd + G + I + X

What is Economic Ac1vity?

Na1onal Income Accoun1ng
Y = Cd + G + I + X
Value of Production over a Period = Y

Y = business saving + household income + business tax payments

Y = Sb+ Cd + M + household saving + household tax payments+ business tax payments

Y = Sb+ Cd + M + Sh + T = Cd + M + S + T

What is Economic Ac1vity?

Na1onal Income Accoun1ng
Y = Cd + G + I + X
Y = Cd + M + S + T

Receives tax from

rms and households

Why is an Understanding of GDP so Important for

Macroeconomics?
Source: Economics Report of the President 2012