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    Measuring The National Income Accounts

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    Yan Kim
    GDP measures the total income earned and total expenditures in an economy. Total income must equal total expenditures because every transaction has a buyer and a seller so that all spending is also income. GDP is defined as the total value of all final goods and services produced within a country's borders in a year, including consumption, investment, government spending, and net exports. GDP can be measured nominally at current prices or adjusted for inflation as real GDP to show actual economic growth. While GDP indicates economic size and living standards, it does not account for all factors that affect well-being.

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    Measuring The National Income Accounts

    Uploaded by

    Yan Kim
    30 views6 pages
    GDP measures the total income earned and total expenditures in an economy. Total income must equal total expenditures because every transaction has a buyer and a seller so that all spending is also income. GDP is defined as the total value of all final goods and services produced within a country's borders in a year, including consumption, investment, government spending, and net exports. GDP can be measured nominally at current prices or adjusted for inflation as real GDP to show actual economic growth. While GDP indicates economic size and living standards, it does not account for all factors that affect well-being.

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    Gdp Reporting

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    GDP measures the total income earned and total expenditures in an economy. Total income must equal total expenditures because every transaction has a buyer and a seller so that all spending is also income. GDP is defined as the total value of all final goods and services produced within a country's borders in a year, including consumption, investment, government spending, and net exports. GDP can be measured nominally at current prices or adjusted for inflation as real GDP to show actual economic growth. While GDP indicates economic size and living standards, it does not account for all factors that affect well-being.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    30 views6 pages

    Measuring The National Income Accounts

    Uploaded by

    Yan Kim
    GDP measures the total income earned and total expenditures in an economy. Total income must equal total expenditures because every transaction has a buyer and a seller so that all spending is also income. GDP is defined as the total value of all final goods and services produced within a country's borders in a year, including consumption, investment, government spending, and net exports. GDP can be measured nominally at current prices or adjusted for inflation as real GDP to show actual economic growth. While GDP indicates economic size and living standards, it does not account for all factors that affect well-being.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 6

    MEASURING THE

    NATIONAL INCOME
    ACCOUNTS
    WHY AN ECONOMY’S TOTAL INCOME EQUALS ITS TOTAL
    EXPENDITURE.
    The task of GDP is judging whether the economy is doing well or
    poorly, it is natural total and total income that everyone in the economy
    is earning.

    GDP measures two things at once: the total income of everyone in the
    economy and the total expenditure on the economy’s output of goods
    and services. The reason that GDP can perform the trick of measuring
    both total in and total expenditures is that these two things are really
    the same. For and economy as a whole. Income must equal to
    expenditure. Why is this true? An economy’s income is the same as its
    because every transaction haw two parties: a buyer and a seller. Every
    dollar/peso of spending by some buyer is of income for some seller.
    How Gross Domestic Product (GDP) is defined and calculated.
    Gross Domestic Product (GDP) – is the monetary value of all the
    finished goods and services produced within a country’s borders in
    a specific time period. Though GDP is usually calculated on an
    annual basis, it can be calculated on a quarterly basis as well.

    GDP includes all private and public consumption, government


    outlays, investments, private inventories, paid-in construction cost
    and the foreign balance of trade.

    GDP = C + I + G + (X-M)
    GDP = private consumption + gross investment +
    government investment + government spending +
    (exports – imports)
    The breakdown of GDP into its four major components.
    1. Personal Consumption Expenditure – this component measures the money
    value of consumer goods and services which are purchased by households and
    non-profit institutions for current use during a period of account

    2. Investment – means addition to the physical stock of capital during a period of


    time.
    3. Government Purchases of Goods and Services – this component summarizes
    government spending on goods and services. It includes purchase of intermediate
    goods and wages and salaries paid by the government. All government purchases
    are a proxy measure for government output.

    4. Net Exports (X-M) – it shows the difference between domestic spending on


    foreign goods (imports) and foreign spending on domestic goods (exports). Thus,
    the difference between exports and imports of a country is called Net Exports.
    The Distinction between real GDP and nominal GDP
    Nominal GDP: Real GDP:
     The aggregate market value of the • Refers to the value of economic output
    economic output produced in a year with produced in a given period adjusted
    in the boundaries of the country. according to the changes in the general
     Refers to the monetary value of all goods price level.
    and services produced during the year • Real GDP reflects current GDP at past
    with. (base) year price.
     Nominal GDP is the GDP without the • Comparison of various financial years can
    effects of inflation or deflation, whereas be made easily because by removing the
    you can arrive at Real GDP, only after figure of inflation, the comparison is made
    giving effects of inflation or deflation. only between outputs produced.
     Reflects current GDP at current price. • Real GDP shows the actual picture of the
     With the help of Nominal GDP you can economic growth of the country, which is
    make comparisons between different not with the case of Nominal GDP.
    quarters of the same financial year.
    Whether GDP is a good measure of economic
    well-being.
    GDP is an indicator of a society’s standard of living, but it is only a rough indicator because it
    does not directly account for leisure, environmental quality, levels of health and education,
    activities conducted outside the market, changes in inequality of income, increase in variety,
    increase in technology, or the positive or negative value that society may place on certain
    types of doubt.

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