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