CH. 6
Imports are subtracted in the expenditure approach in calculating GDP, because
Consumption, investment and government spending are overstated as these include expenditures on both domestic and foreign goods
The relationship between Net Investment and GDP is given by,
GDP - Consumption - Government Purchases - Exports + Imports - Depreciation
Gross National Income of a Country is
GNP converted into dollars using an average of exchange rates between the currency of the country and dollar over several years adjusted for inflation
Net Investment = ?
Gross Private Domestic Investment (I) - Depreciation
Gross Private Domestic Investment (I) ?
Nonresidential Investment + Residential Investment + Changes in Business Inventories
GDP calculated by the expenditure approach will be EQUAL TO the GDP calculated by the income approach, because
The dollar value of the expenditure on new goods and services in a year must be equal to the dollar value of the income generated in that year
One reason why GDP is not a good measure of national well-being is that it fails to take into account
Value of leisure
GDP is different from final sales since
final sales ignores changes in inventory, which are included in GDP calculation