Chapter 5 - Chapter 5 A. Economys Income and Expenditure a....

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Chapter 5 A. Economy’s Income and Expenditure a. GDP i. Natural to look at total national income when determining whether the economy is doing well or poor. ii. GDP measures total income or total expenditure. $100 for lawn mowed is $100 spent by buyer and received by seller of a service. iii. All expenditure ends up as someone else’s income. B. Measuring GDP a. Using Market Prices i. Amount people are willing to pay for different goods. ii. If the price of an apple is twice as much as oranges, then apples contribute twice as much to GDP as oranges. b. All Goods i. Does not measure items sold illicitly. 1. Illegal drugs and food grown on your own are not measured. ii. If lawn is mowed by married couple, no valued transaction takes place. c. Final Products i. Paper made for greeting cards not added into GDP since final card includes price to make paper. ii. Paper is known as intermediate good . d.
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Chapter 5 - Chapter 5 A. Economys Income and Expenditure a....

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