xid-652004_1 - Measuring Domestic Output EXPENDITURE...

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Measuring Domestic Output EXPENDITURE APPROACH : Add up all the spending on final goods and services that has taken place throughout the year Consumption ( C ) All expenditure by households on durable and nondurable consumer goods, and services. Gross Investment ( I ) Includes all final purchases of machinery, equipment, and tools by business enterprises. It also includes all construction and changes in inventories. Government Purchases ( G ) All expenditure made by government (federal, state and local) in goods and services, and social capital. Net Exports ( NX ) Exports ( X ) Imports ( M ) GDP = C + I + G + NX INCOME APPROACH : Add up all the payments made by firms to household for the services of the factors of production. Compensation of employees Wages and salaries paid to employees. Rents Payments to Land. Interest Payments to Capital. Proprietor’s income Profits earned by entrepreneurs. Corporate Profits Earnings of the owners of corporations.
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