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GDP GDP stands for gross domestic product.  It's the total market value of all final goods and services produced within a countries borders within a given year.  INCLUDED IN GDP:  Personal consumption expenditures (C) Gross private domestic investment (Ig) Government spending (G) Net exports (Xn) Formula is: C + IG + G + (Xn, which is export - import) NOT INCLUDED IN GDP: 1. Used or Second hand goods (avoid double or multiple counting & is only counted once) 2. Gifts/Transfer Payments (public or private and recipients to gifts contribute nothing to the current production) 3. Stocks and Bonds (purely financial transactions, no outputs produced) 4. Unreported business activities (ex.tips) 5. Illegal Activities (ex. drugs, prostitution...) 6. Intermediate goods (goods that require further processing before they are ready for final use) 7. Non- Market Activities (ex. babysitting, volunteer, family work...) GNP: Gross National Product Measure of what its c...

THE MARKET ECONOMY Circular Flow Model The two markets are factor and product.  In the circular flow model, expenditure flows are the monetary activities that households contribute to the product market, which supply the firms. In return, the income flows, that develop from the firms, provide jobs to the factor market which the households fill in for income. FACTOR MARKET: Firms buy and household sells Household ---> Factors of Production (supply) = Factor Market In return, Factor Market ---> wages, rents, interest, and profits (demand) = Household A shorter way to remember is willy rest in peace (WRIP) ex: Taco Bell just hired you to assemble tacos With Firms, they buy resources and sell products. FIRMS---> cost = Factor Market Factor Market ---> Resources; Factors of Production(demand)= Firm       2. PRODUCT MARKET: Firm sells and household buys dec. US EXPORTS, inc. FOREIGN EXPENDITURES, dec. US EXPENDITURES, inc. US I...

QUANTITY: NEW - OLD / OLD PRICE: NEW - OLD / OLD PED (PRICE OF ELASTICITY DEMAND)- % CHANGE IN QUANTITY / CHANGE IN PRICE TOTAL COST (TC): TFC + TVC TOTAL FIXED COST (TFC): AFC X QUANTITY TOTAL VARIABLE (TVC) : AVC X QUANTITY TOTAL COST (TC): ATC X QUANTITY MARGINAL COST (MC): OLD TC - NEW TC AVERAGE FIXED COST (AFC): TFC / QUANTITY AVERAGE VARIABLE COST (AVC): TVC / QUANTITY AVERAGE TOTAL COST (ATC): TC / QUANTITY or AFC + AVC

Fixed cost- cost that does NOT change no matter how much of a good is being produced. examples include: salary, parents mortgage.  Variable cost- costs that rises or falls depending upon how much is produced. examples include: electricity Marginal cost- cost of producing one more unit of a good. examples include: senior shirt example story .. Revenue = receving Cost = what you give Price ceiling- (" Buyers") legal maximum price meant to help buyers. examples include: rent center 4 consequences are set to low:  Lowered prices for some consumers Shortages Long lines for some buyers Illegal sells above the equilibrium price Price floor-("Sellers") legal minimum price meant to help sellers keep price from falling.  examples include: minimum wage 4 consequences:  higher product prices suplus higher taxes waste Business cycle- fluctuation in economic activity that an economy experience over a period of time  Expansion- it's a...