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EC140 Lecture Notes - Lecture 3: Counting Measure, Gdp Deflator, Environmental Quality

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School
WLU
Department
Economics
Course
EC140
Professor
Ken Jackson

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EC140 Full Course Notes
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Document Summary

If all production was sold and consumed, gdp would be easily measured. Outputs of one company are imputes for others. Measuring value of output counts some output more than once. Measuring gdp is about measuring final production. To avoid double counting- measure value added by all firms. Value added is sales revenue- cost of intermediate goods. Value added is definitionally equal to wages paid to workers plus profits paid to owner. Total of all added in the economy is a measure of total output. Gdp is the total value of final goods and services produced. Wide range of approaches to measuring gdp. Value added by all firms in the economy. Domestic producers is going to be equal to total expenditure which is equal to total income generated by domestic production. Domestic households choose to spend and save money, what they choose to save does not contribute to gdp. Savings go to financial systems which invest the money.

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Related Questions

Gross Domestic Product (GDP) only measures the value of marketed goods and services for a country during a given period of time.

Is the GDP measure underestimating or overestimating national production and total income in the economy? Why?

What are the limitations of the GDP in measuring total output and national welfare? What products (services) are excluded from the GDP computation?

In a given year, we find the value of final goods and services produced in the economy is $15t. Your professor told you that this is the expenditure approach to measuring GDP. He also told you we can measure GDP using the value of all the incomes generated from that production, but when you do, the dollar value of incomes is less than $15t. Please explain why this is so AND how this problem is corrected.

Topic 1: GDP and Its Limitations

The national income accounts measure productivity, spending, and income; but these accounts were not designed to measure economic welfare. GDP only measures the value of marketed goods and services for a country during a given period of time. Goods and services that are not sold in markets, such as food produced and consumed at home and household articles, are not included in GDP. Discuss aspects of economic welfare ignored in GDP measurement.

Discussion Checklist:

A.) What are the limitations of the GDP in measuring total output and national welfare?

B.) What products (goods and services) are excluded from the GDP computation?

C.) What are the impacts of the shortcomings of the GDP as a measure of the national product and national welfare?