Chpt 2 - (Part 1)

Chpt 2 - (Part 1) - National Income Accounting Chapter 2...

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1 Chapter 2 The Measurement and Structure of the National Economy 2 National Income Accounting ± National income accounts : an accounting framework used in measuring current economic activity. ± These accounts are set up in a way that mirrors the structure of the economy, so they help us understand how the economy works. 3 National Income Accounting ± In the United States, the national income accounts are constructed quarterly by government economists and statisticians in the Bureau of Economic Analysis (BEA), a part of the Department of Commerce. ± BEA Website: http://www.bea.gov/ 4 How to measure economic activity ? Producers Consumers $ Output Produced Incomes received Expenditures 5 How to measure economic activity ? ± Product Approach : measure the market value of output produced , excluding output used up in intermediate stages of production. ± Income Approach : measure the incomes received by the producers of output. ± Expenditure Approach : measure the amount spent by all end users of output. 6 How to measure economic activity ? ± In principle, the 3 approaches should yield the same measurement of current economic activity. ± In practice, there might be some discrepancies due to incomplete or misreported data.
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2 7 Example OrangeInc JuiceInc Consumers $ orange orange $ juice $ 8 Example OrangeInc Transactions Expenses: Wage bill $15,000 Tax payment $ 5,000 Revenue: Orange sold to public $10,000 Orange sold to JuiceInc $ 25,000 Total $ 35,000 JuiceInc Transactions Expenses: Wage bill $ 10,000 Tax payment $ 2,000 Oranges purchased from OrangeInc $ 25,000 Revenue: $ 40,000 9 Example : Income Approach ± The income approach measures economic activity by adding all the incomes generated by production, including { wages received by workers { (before-tax) profits received by owners of firms 10 Example: Income Approach OrangeInc Transactions Wage bill $15,000 Tax payment $ 5,000 Revenue Orange sold to public $10,000 Orange sold to JuiceInc $ 25,000 Total $ 35,000
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Chpt 2 - (Part 1) - National Income Accounting Chapter 2...

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