tailieunhanh - Lecture Economics (9/e): Chapter 25 - David C. Colander

Chapter 25 - Measuring the aggregate economy. After reading this chapter, you should be able to: Calculate GDP using the expenditures and, value added approaches, calculate aggregate income and explain how it relates to aggregate production, distinguish real from nominal concepts, describe the limitations of using GDP and national income accounting. | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Goals Calculate GDP using the expenditures and value added approaches Distinguish real from nominal concepts Calculate aggregate income and explain how it relates to aggregate production Describe the limitations of using GDP and national income accounting 2 Aggregate Accounting Aggregate accounting (or national income accounting) is a set of rules and definitions for measuring economic activity in the economy as a whole Aggregate accounting is a way of measuring total, or aggregate production, expenditures, and income Gross domestic product (GDP) is the total market value of all final goods and services produced in an economy in a one-year period 3 The Components of GDP GDP is divided into four expenditure categories: Consumption (C) is spending by households on goods and services Investment (I) is spending for the purpose of additional production Government spending (G) is goods and services that government buys Net exports is spending on exports (X) minus spending on imports (M) GDP = Consumption + Investment + Government spending + Net exports GDP = C + I + G + (X-M) 4 GDP Measures Final Output GDP does not measure total transactions in the economy It counts final output, but not intermediate goods Final output is goods and services purchased for final use Intermediate products are used as an input in the production of some other product Counting the sale of both final and intermediate goods would result in double counting 5 Two Ways of Eliminating Intermediate Goods Calculate only final output A firm would report how much it sold to consumers and how much it sold to producers (intermediate goods) Follow the value added approach Value added is the increase in value that a firm contributes to a product or service It is calculated by subtracting intermediate goods (the cost of materials that a firm uses to produce a good or service) from the value of its sales 6 . | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Goals Calculate GDP using the expenditures and value added approaches Distinguish real from nominal concepts Calculate aggregate income and explain how it relates to aggregate production Describe the limitations of using GDP and national income accounting 2 Aggregate Accounting Aggregate accounting (or national income accounting) is a set of rules and definitions for measuring economic activity in the economy as a whole Aggregate accounting is a way of measuring total, or aggregate production, expenditures, and income Gross domestic product (GDP) is the total market value of all final goods and services produced in an economy in a one-year period 3 The Components of GDP GDP is divided into four expenditure categories: Consumption (C) is spending by households on goods and services Investment (I) is spending for the purpose of additional production Government spending (G) is goods and .