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8-21-2007 - Economics Chapter 5 Production Income and...

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Economics: 8/21/2007 Chapter 5- Production, Income and Employment Measuring Aggregate Output GDP- Total value of all final goods and services produced for the marketplace during a given period within the nation’s borders. (p. 104) By focusing on final goods, double counting is avoided. In general, only goods and services produced for the marketplace count in any periods GDP. Home production of goods and services don’t count. Within a given period means that the 2004 GDP measures only the goods produced in 2004. Within Nation’s borders- Goods produced within the borders of the US by foreigners count in the GDP. (GNP measures output produced by citizens of a given country) There are 3 approaches to measuring the GDP: 1. Expenditure approach a. GDP= C+I+G+NX i. Consumption, investment, governments, and net expenses. 2. Value added approach a. GDP= Sum of value added by all firms. 3. Factor (resource) payments approach a. GDP= sum of factor payments made by all firms i. Wages and salaries +interest + rent + profit ii.
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