Macro. Assignment 4-GDP .docx

Macro. Assignment 4-GDP .docx - Macroeconomics Assignment 4...

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Macroeconomics Assignment 4: GDP Circular Flow o Equivalence of product and income side of flow – produce ‘stuff’, pay salary and other income o PRODUCTION GENERATES INCOME THAT IS USED TO PURCHASE PRODUCTION o Physical and money flow equivalent- produce 10 toasters equals spend $100 on toasters (@ $10 each) Measure production by product or expenditure on product Or measure by factor inputs (amount of labor), or income paid to factors (incomes) o Leakages (saving, tax, imports) and Injections (investment, exports) Overview of National Income and Product Accounts (NIPA) o Product and Income sides o C + I + G + NX = Y = Wages + Rent + Profits + Interest = C + S + T (roughly) Some key concepts in GDP and its calculation o Gross and Net investment and Depreciation Gross investment: includes the total of all investments made in a country during one year. The country, however does not benefit from all of the money invested in machines and equipment because some machines age during the year. They do not work as well, and therefore contribute less to overall production Net investment: equals gross investment, minus annual wear and tear. Another word for the wearing of machines is depreciation. Net investment represents the actual amount of investments in the country taking into account depreciation of existing equipment o
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  • Fall '18
  • Sweeney
  • gross domestic product,  Measure production

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