chapter 7 econ
income approach, expenditure approach
two approaches to GDP
purely financial transactions, secondhand sales
two types of non production transactions
economy overall performance
what does national income accounting measure
purchase of bakes goods by a hotel restaurant
intermediate good ex
A. they do not take into account changes in the amount of leisure. B. they do not take into account all changes in product quality. C. they do not take into account the adverse effects of economic activity on the environment.
13. GDP data are criticized as being inaccurate measures of economic welfare because
=C+Ig+Xn
GDP formula
only counting final goods
National income accountants can avoid multiple counting by:
bureau of economic analysis
assesses health of economy, track long run course, formulate policy
subtracting NDP from GDP
consumption of fixed capital (depreciation) can be determined by
haircut
example of a final good/service
public transfer payments, private transfer payments, stock and bond market transactions
exclude financial transactions
sell used car to friend
exclude second hand sales
(1) consumption by households, (2) investment by businesses, (3) government purchases, and (4) expenditures by foreigners
expenditures measure as sum of 4 items
the economy stock of capital is shrinking
if depreciation exceeds gross investment
(1) wages, (2) rents, (3) interest, (4) profits, and (5) statistical adjustments
income approach uses sum of 5 items
income approach
looks at GDP in terms of the income derived, or created, from producing goods and services.
expenditure approach
measures GDP as the sum of all of the money spent in buying the output
exports - imports
net exports formula