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