ECO209Y5 Chapter Notes - Chapter 1: Intermediate Good, Inventory Investment, Fixed Investment

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greymuskrat509

10 Oct 2014

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Gdp: dollar value of final output produced during given period of time within borders of canada. 3 approaches to measure : product approach, expenditure approach and income approach. Intermediate good: good that is produced and then used as an input to another production process. After tax profits = total revenue wages interest cost of immediate inputs taxes. Product approach (aka value added approach) : calculated as sum of value added to goods and services in production across all productive units in economy. Gdp = value of all goods value of all intermediate goods used in production to obtain total value added. Expenditure approach: total spending on all final goods and services production in economy (gdp) total expenditure: c+i+g+nx. Income approach: add up all incomes received by economic agents contributing to production income will include profits made by firms (wage income, after tax profits, interest income, taxes and gdp)

Related Questions

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.

yellowwoodchuck103

The expenditure and resource cost-income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:

Ralph pays The Home Station $1,200 to plant a new lawn in his backyard. He's attracted by The Home Station's guarantee that he'll be happy with the new lawn, or he'll get his money back.

The Home Station pays Al's Lawn Care $850 to plant the lawn.

Al's Lawn Care buys grass seed worth $200 from Green Center Nursery.

Compute contributions to GDP, using the expenditure approach. Assume that Green Center Nursery receives the grass seed at no charge and that other costs are zero.

Hint: Add the amount of money spent by buyers of final goods and services.

Which of the following would be included in the expenditure method of calculating GDP? Check all that apply.

-The Home Station spends $850.

-Ralph spends $1,200.

-Al's Lawn Care spends $200.

The total contribution to GDP, measured by the expenditure method, is $______

Now use the following table to compute contributions to GDP, employing the resource cost-income approach. In particular, indicate the costs of intermediate goods and the value-added at each stage of production.

Stage of Production	Sale Value	Cost of Intermediate Goods	Resource Cost-Income
Green Center Nursery	$200	?	?
Al's Lawn Care	$850	?	?
The Home Station	$1,200	?	?

The contribution to GDP that you found using the expenditure approach corresponds to the sum of the _____ at each stage of production.

peachhedgehog527

Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.

ECO209Y5 Chapter Notes - Chapter 1: Intermediate Good, Inventory Investment, Fixed Investment

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