Chapter 23

Chapter 23 transitions from micro to macro economics. Macroeconomics is the study of bigger, more economy wide issues such as inflation and unemployment. The chapter also introduces the concept of gross domestic product, or GDP. Gross domestic product measures the total income for a country and is the best single statistic in determining that nation's well-being. The exact definition for gross domestic product is the "market value of all final goods and services produced within a country in a given period of time". For the country to be successful, income must at least equal expenditure. Gross domestic product only includes final goods, not intermediate goods. Intermediate goods are like the materials or resources to make a product, while the final product is the final good. Gross domestic product is also split into 4 different components. Consumption is the spending by households on all things except buying a home. Investment is the money spent on capital, including housing. Government purchases are the expenditures on goods and services on all levels of government. Net exports is exports minus the expenditure on imports. There are two types of gross domestic product, nominal GDP and real GDP. Nominal GDP are the goods that have fluctuating prices while real GDP goods have constant prices. The GDP deflator is the measure of price that is the ratio of nominal over real multiplied by one hundred.