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# CHAPTER 9 APPLICATIONS INTERNATIONAL TRADE

## Nominal GDP = values the production of goods and

services at current price (inflation)
Consumer surplus + Producer Surplus = Total benefit of
Nominal GDP year 1 = ( P1 × Q )
Nominal GDP year 2 = ( P2 × Q )
If a country has comparative advantage, that country
will be exporter Real GDP = values the production of goods and
services at constant price (production)
If world price above domestic price, will be export
because quantity supplied higher than quantity demand Nominal GDP year 1 & 2 = ( P1 × Q )
and sellers are better-off, buyers are worse-off
GDP deflator = melihat peranan harga terhadap GDP
Tarrif is a tax for the import goods. With tarrif, prices
rise and governments are better-off 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃
GDP deflator = 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃
× 100
Quota is a limit on the quantity of the import goods.
GDP per person = income and expenditure of the
With tarrif, prices rise and license holders are better-off
average person in the economy
Inflation rate year 2 =
𝐺𝐷𝑃 𝑑𝑒𝑓𝑙𝑎𝑡𝑜𝑟 𝑦𝑒𝑎𝑟 2 − 𝐺𝐷𝑃 𝑑𝑒𝑓𝑙𝑎𝑡𝑜𝑟 𝑦𝑒𝑎𝑟 1
 Increased variety of goods 𝐺𝐷𝑃 𝑑𝑒𝑓𝑙𝑎𝑡𝑜𝑟 𝑦𝑒𝑎𝑟 1
× 100
 Lower costs through economies of scale
 Increased competition CHAPTER 24 MEASURING THE COST OF LIVING
 Enhanced flow of ideas
Consumer price index (CPI) = a measure of the overall
CHAPTER 23 MEASURING A NATION’S INCOME cost of the goods and services bought by a typical
consumer.
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑙𝑖𝑣𝑖𝑛𝑔 𝑦𝑒𝑎𝑟 1,2,3
CPI = × 100
𝑐𝑜𝑠𝑡 𝑜𝑓 𝑙𝑖𝑣𝑖𝑛𝑔 𝑦𝑒𝑎𝑟 1

## Inflation rate year 2 =

𝐶𝑃𝐼 𝑦𝑒𝑎𝑟 2 − 𝐶𝑃𝐼 𝑦𝑒𝑎𝑟 1
𝐶𝑃𝐼 𝑦𝑒𝑎𝑟 1
× 100 = ... %

## GDP deflator reflects the prices of all goods and

services produced domestically

## CPI reflects the prices of all goods and services bought

by consumers
GDP is the market value of all final goods and services
produced within a country in a given period of time. Problem measuring cost of living :
GDP = Consumption + Investment + Government  Substitution bias
Purchases + Net Exports  Introduction of new goods
Consumptions = durable goods (automobiles,  Unmeasured quality change
appliances), nondurable goods (goods, clothing),
Nominal interest = without a correction for the effects
services (haircuts, medical care, education)
of inflation
Investment = new housing, capital, equipment,
Real interest = corrected for the effects of inflation
inventories, structures (used to produce other goods and
get gain or increase the capital) Real interest rate = Nominal interest rate – inflation rate

## Government purchases = salaries of PNS, except

transfer payments