ECON 1010 Chapter Notes -Net Domestic Product, Environmental Quality, Potential Output
Document Summary
Income flows from firms to factor markets to households: c represents consumption expenditures which flow from households to goods markets to firms. Combination of wages (plus benefits and pension contributions) All above factors are included in ofi (the income flow, y) Sum of all factor incomes is net domestic income at factor cost. Indirect taxes less subsidies are added to get from factor cost to market prices. Real gdp per person = real gdp/populaton. Tells us value of goods and services that the average person can enjoy often expressed as ratio living. By using real gdp we remove influence of rising prices and a rising cost of. Potential gdp is the value of all economy"s labour, capital, land and entrepreneurial ability when it is fully employed: to compare standard of living across countries. Two problems in using real gdp to compare: