ECON 102 Lecture Notes - Black Market, Disposable And Discretionary Income, Thrice

27 views13 pages
Published on 18 Apr 2013
School
UBC
Department
Economics
Course
ECON 102
Professor
TEXTBOOK NOTES 1/26/2013 5:48:00 PM
NATIONAL OUTPUT AND VALUE ADDED
- one firm’s output is often another firm’s input
EX a local baker uses flour (input) from a milling company (output)
- Production occurs in stages: Some firms produce outputs that are used as
inputs by other firms, and these other firms, in turn, produce outputs that
are used as inputs by yet other firms
this is why we do not count every firm’s output when adding
national output
- double counting can be solved by distinguishing intermediate goods and
final goods
but it is impossible to determine what will ultimately be a
intermediate good
we must use the value added concept
- an individual firm’s value is:
VALUE ADDED = Revenue Cost of intermediate goods
But since we must consider other factors of payment (wages, etc)
we use:
VALUE ADDED = Payments to factors of production
- value added is the NET VALUE of a firms outputs
it is this net value that is the firm’s contribution to the national
output the firm’s personal efforts that add value to what is uses
as inputs
- the sum of all values added in an economy is a measure of the economy’s
total output
NATIONAL INCOME ACCOUNTING: THE BASICS
- the value of domestic output is equal to the value of the expenditure on
that output and is also equal to the total income claims generated by
producing that output
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 13 pages and 3 million more documents.

Already have an account? Log in
- GDP can be calculated three different ways:
GDP by value added
GDP on the expenditure side
GDP on the income side
GDP on the Expenditure Side
- computed by adding up all the expenditures needed to purchase the final
output that year
- Four broad categories of expenditure:
consumption
investment
government spending
net exports
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 13 pages and 3 million more documents.

Already have an account? Log in
Consumption Expenditure
- Consumption expenditure includes household purchases such as hair
cuts, legal advice, groceries, health care, etc.
- Ca = actual measured consumption expendature
Investment Expenditure
- Investment expenditure is money spent on investment goods such as
capital goods (factories, machinery) and investments
- almost all firms hold stocks on their inputs (unfinished material can
continue production despite interruption) and their outputs (allow firms to
meet orders despite production rate fluctuations) called inventories
- inventories are considered a positive investment and are counted in the
national income accounts at market value includes wages, production
cost, and future profit
- decumulation is considered negative investment because it reduces stock
available to be sold
- capital goods (tools, machinery, factory buildings) are all counted as
capital stock
- the creation of new capital goods is an investment we call fixed
investment
- since the building a house is the creation of a durable good, we consider it
an investment
the purchase of a house/transfer of ownership the transaction is not
considered in national income
- Gross investment (total economy investment) is divided into replacement
investment and net investment
replacement investment = replacement of capital stock that is lost
through depreciation
net investment = gross investment - depreciation
- positive net investment means growing capital stock
- negative net investment means shrinking capital stock
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 13 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Grade+

Unlimited access to all notes and study guides.

YearlyMost Popular
75% OFF
$9.98/m
Monthly
$39.98/m
Single doc
$39.98

or

You will be charged $119.76 upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.