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ZERO BOND: Also termed a zero coupon bond, a bond that does not pay interest, in which the return is generated by the difference between the purchase price and the face value paid at maturity. Because they do not pay interest, zero bonds are sold at a discount. For example, a $10,000 zero bond that matures in one year, would generate a 10% return if it sold at a discount of $9,000.
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Lesson 10: Gross Domestic Product | Unit 1: Measuring Production
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Page: 2 of 25
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Topic:
Total Market Value
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Let's highlight the phrase 'total market value' in this definition of GDP. First, total. GDP seeks to measure ALL production of goods and services in the economy. Second, market value. Market prices indicate the value of goods. We measure the total value of production by multiplying the quantity produced and traded through markets by market prices. GDP is the aggregation of the market value of all goods. - Market transactions provide an excellent source of information that can be used for calculating GDP.
- Dollars (market prices) provide a common denominator for aggregating different goods.
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ASSUMPTIONS, CLASSICAL ECONOMICS Classical economics, especially as directed toward macroeconomics, relies on three key assumptions--flexible prices, Say's law, and saving-investment equality. Flexible prices ensure that markets adjust to equilibrium and eliminate shortages and surpluses. Say's law states that supply creates its own demand and means that enough income is generated by production to purchase the resulting production. The saving-investment equality ensures that any income leaked from consumption into saving is replaced by an equal amount of investment. Although of questionable realism, these three assumptions imply that the economy would operate at full employment.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time surfing the Internet wanting to buy either a weathervane with a horse on top or a case of blank recordable DVDs. Be on the lookout for slightly overweight pizza delivery guys.
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
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"Progress begins with the belief that what is necessary is possible. " -- Norman Cousins, editor, writer
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AACP
American Assocation of Commercial Publications
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