APEconCh.6Test.pdf - Measuring Domestic Output National...

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Measuring Domestic Output National Income Accounting: To determine a nation’s income: Total up the yearly amount earned by the nation’s resources (L, L, C, E) in form of (w, r, i, pi) Total income=total output of a nation $ Value of Income= $ Value of Output Total income→ is the amount PAID for use of resources ($ received by resource owners)- all of the work done by the resources is the Total output Think back to the circular flow--the sellers of resources and products receives the exact same amount the buyer spends--assuming no taxes To determine the nation’s Gross Domestic Product It is the market value of all final goods and services produced by the land, labor, capital, and ent. talent in an economy in a given year OR--the total the market value of the nation’s annual final product (or output) produced per year by factors of production located within national borders GNP→ gross national product measures value of output of final goods and services owned by nation’s residents--even when production takes place OUTSIDE national borders GDP: The only one we really care about, GNP not really used anymore To calculate: must consider not just items produced--but how much they were sold for to determine relative worth GDP counts only final goods→ purchases not intended for resale; Don’t count stages or
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