National Income and Product Accounting. Seeks to measure the output of the entire economy as well as flows between sectors.
Income v. Output v. Expenditures
Income: earned Expenditures: spent Output: produced
Three ways to measre total value of output
Output method, income method, expenditure method. Income = expenditure = value of output (they all equal, all 3 methods)
Gross Domestic Product. The MARKET value of all final goods and services produced in a year.
Larger GDP ==>
PPC shifts outwards, more goods and services
GDP is an ___estimate of the economic activity.
Underestimate. Because it doesn't measure activities not traded in a market. Housework Illegal activities Barter trades
A good that is used as the input in production of another good. EX: steel used to make cars, tortillas supplied to baja fresh, etc. Will be counted along with other intermediate goods that make up the one final good.
Period Of Account
A good/service that is produced but not sold within a year is an addition to INVENTORY INVESTMENT. Business sells finished car to itself, but not yet to the consumer. Year of production matters, not year of sale.
How to measure GDP
PxQ (output measure) price x quantity
Expendture method: GDP= C+I+G+X-M
Income measure: GDP = wages + interest + rent + profits - net factor income from abroad + capital consumption + indirect business taxes
Movement of Economics
A > M > S Agricultural -> manufacturing -> services
Output measure of GDP
A measure of all final goods and services an economy produces in a year w/in their borders.
Expenditure Measure of GDP
A measure of all the payments made by diff sectors of the economy to receive goods and services in a year. GDP = Private consumption + Gross private domestic investment + govt purchases + exports - imports. GDP = C+I+G+X-M
x-m Exports - imports
Primary expenditure in the USA
More imports than exports. (X-M) = negative value.
Index of openness
Lvl of exports / GDP x 100
Income Measure of GDP
A measure of all the payments made to resource holders (employees) for the resources they provide in the production of goods and services with a year, within the borders of the USA> GDP = wages + interest + rent + profits - net factor income from abroad + capital consumption + indirect business taxes
Net Factor Income from Abroad
The difference between the US citizens return and the foreigners return.
Capital consumption allowance
(depreciation). The estimated value of depreciation PLUS the value of accidentaly damage to capital stock. Assets that get destroyed as we use them.
Biggest part of GDP by income
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