MGEA06H3 Lecture Notes - Income Approach, Capital Formation, Fixed Capital

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Iris Au

Document Summary

Expenditure approach: the expenditure approach: gdp = c + i + g + x im, gdp = . 6b + (. 0b + ( . 0b)) + . 4b + . 2b . 1b. Gdp = . 1b: note: i = fixed capital formation + change in inventories. We do not include capital consumption allowances (cca) because it is already included in fixed capital formation. Part (c: gdp (using the expenditure approach) calculates the total (market) value of final goods and services produced within the country in a given year. Indeed, this would be an error since the . 6b includes spending on both domestically produced and foreign made goods and services: note: the same logic applies to investment and government spending. Gdp (the income approach): there is no need to work out profits, firm 1"s value added = (value of final products spending on intermediate goods) = .