An Open Economy Framework

Gross Domestic Product

Economist track the overall or aggregate amount of economic activity using gross domestic product (GDP) GDP is the market value of all final goods and services produced within an economy during a given time period.

Daniels and VanHoose

An Open Economy Framework

Nominal versus Real

Nominal GDP measures the current market value of all final goods and services produced within an economy during a given time period. Real GDP, in contrast, in a price-adjusted measure of aggregate output. Real GDP is calculated by dividing nominal GDP by the GDP price deflator.
Daniels and VanHoose An Open Economy Framework 3

Price Measures
The GDP price deflator is a measure of the overall price level of an economy. The consumer price index (CPI) is a weighted sum of prices of goods and services that the government determines a typical consumer purchases each year. The producer price index (PPI) is a weighted average of the prices of goods and services that the government determines a typical business receives from selling its products during a given year. Daniels and VanHoose An Open Economy Framework

The Circular Flow of Expenditures

Saving, Imports and Consumption

Changes in Desired Investment

Government Spending and Net Taxes

Exports

Deriving the Aggregate Expenditures Schedule

Two Approaches to Determining Equilibrium Real Income

The Derivation of the IS Schedule

The Money Demand Schedule

Attaining Equilibrium in the Market for Real Money Balances

The Derivation of the L-M Schedule

Changes in the Real Money Supply

IS-LM Equilibrium and Disequilibrium

The BP Schedule

IS-LM Equilibrium and the BP Schedule