ECON 105 Lecture Notes - Real Interest Rate, Menu Cost, Capital Outflow
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ECON 105 Full Course Notes
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To calculate gdp as the value added in production, we need to sum all value added (value of output less input costs) for each company. Value added in the bread company is ; in the cheese company, ; and in the pizza company, The total value added in production is . To calculate gdp as spending on final goods and services, we need to sum the value of bread, cheese, and pizzas sold as final goods. Gdp equals because the bread company sells worth as final goods, the cheese company sells worth as final goods, and all worth of pizzas are final goods. To calculate gdp as factor income, we need to sum factor income (labor and profits) for each firm. For the bread company, factor income is : labor earns. For the cheese company, factor income is : labor earns. For the pizza company, factor income is : labor earns.