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ECON 1020 (99)
Lecture 18

ECON 1020 Lecture 18: Lecture 18

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University of Manitoba
ECON 1020
Ryan A.Compton

o78P Two Ways of Calculating GDP: Expenditures and Income: The expenditures and income approaches are two ways of looking at the same thing: what is spent on making a product is income to those who helped to make it Expenditures approach: the method to measure GDP that adds up all the expenditures made for final goods and services The expenditures approach adds up: o Personal consumption expenditure (C) o Gross investment (Ig) o Government purchases (G) Net exports (Xn) = exports (X) imports (M) Income approach: the method to measure GDP that adds up all the income generated by the production of final goods and services Buying (spending money) and selling (receiving income) are two aspects of the same transaction On the expenditures side of GDP, all final goods produced by the economy are bought either by three domestic sectors (households, businesses, and government) or by buyers abroad On the income side of GDP, the total receipts from the sale of that total output go to the suppliers of factors of production as wages, rent, interest, and profit The Expenditures Approach: Add up all the spending on final goods and services that has taken place throughout the year Example: TABLE 53 Personal Consumption Expenditures (C): o Consumption expenditures by households = personal consumption expenditures o Personal consumption expenditures (C): the expenditures of households for durable and nondurable consumer goods and services
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