ECON 102 Quiz: Chapter 20 Summary
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ECON 102 Full Course Notes
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Total output = value it is sold to public for. You can"t just add up companies output to get national income/gdp. Because some firms output is another ones input. Farmer"s output of wheat mill"s output of flour bakery"s output of. If you added up every companies outputs, you would add wheat 3 times, flour twice and bread once (double counting) Goods that aren"t used as inputs by other firms. Ready for consumption, export or investment in time period. Outputs that are used as inputs for another firm. You can"t be sure though if it is a final good. Bakery doesn"t know if bread bought is a final good or will be used at a restaurant. Correct way to avoid double counting = value added approach. Value added = sales revenue - cost of intermediate goods (all inputs) Amount of value firms add to their products after the cost of intermediate goods.