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Chapter 5

Chapter 5

4 Pages
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Department
Economics
Course Code
ECN 204
Professor
Thomas Barbiero

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CHAPTER 5: Measuring the Economys Output
5.1 Measuring the Economys Performance: GDP
National Income accounting: techniques used to measure the overall production of
the economy and other related variables for the nation as a whole
Gross domestic product (GDP): total market value of all final goods and services
produced annually within the boundaries of Canada
omain measure of the economys performance
oA Monetary Measure
Avoiding Multiple Counting:
oTo avoid multiple counting, only final goods and services are counted
oFinal goods: Goods and services purchased for final use and not for resale or
further processing or manufacturing
oIntermediate goods are not counted
oIntermediate goods: Products purchased for resale or further processing or
manufacturing
GDP Excludes Nonproduction Transactions
oTwo types of nonproduction transactions:
1.Financial transactions
a. Public Transfer Payments (social insurance payments)
b. Private Transfer Payments (personal payments)
c.Stock-Market Transactions (buying and selling of stocks (and bonds))
2.Second-hand sales
Two Ways of Calculating GDP: Expenditures and Income Approach
oThe Expenditures Approach: Add up all the expenditures made for final goods
and services.
The Expenditures Approach adds up
personal consumption expenditures (C): expenditures by households on durable and
nondurable consumer goods and services
gross investment (Ig): expenditures for newly produced capital goods (machinery,
equipment, tools, and buildings) and for additions to inventories
government purchases (G): expenditures of all governments in the economy for final
goods and services
Net exports (Xn) = exports (X) imports (M)
GDP = C + IG+ G + XN
Net Investments: gross investments less consumption of fixed capital
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Description
CHAPTER 5: Measuring the Economys Output 5.1 Measuring the Economys Performance: GDP National Income accounting: techniques used to measure the overall production of the economy and other related variables for the nation as a whole Gross domestic product (GDP): total market value of all final goods and services produced annually within the boundaries of Canada o main measure of the economys performance o A Monetary Measure Avoiding Multiple Counting: o To avoid multiple counting, only final goods and services are counted o Final goods: Goods and services purchased for final use and not for resale or further processing or manufacturing o Intermediate goods are not counted o Intermediate goods: Products purchased for resale or further processing or manufacturing GDP Excludes Nonproduction Transactions o Two types of nonproduction transactions: 1. Financial transactions a. Public Transfer Payments (social insurance payments) b. Private Transfer Payments (personal payments) c. Stock-Market Transactions (buying and selling of stocks (and bonds)) 2. Second-hand sales Two Ways of Calculating GDP: Expenditures and Income Approach o The Expenditures Approach: Add up all the expenditures made for final goods and services. The Expenditures Approach adds up personal consumption expenditures (C): expenditures by households on durable and nondurable consumer goods and services gross investment (Ig): expenditures for newly produced capital goods (machinery, equipment, tools, and buildings) and for additions to inventories government purchases (G): expenditures of all governments in the economy for final goods and services Net exports (Xn) = exports (X) imports (M) GDP = C + I +GG + X N Net Investments: gross investments less consumption of fixed capital www.notesolution.com
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