Chapter 6

Chapter 6 - MeasuringDomesticOutputandNationalIncome...

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Measuring Domestic Output and National Income CHAPTER OVERVIEW News headlines frequently report the status of the nation’s economic conditions, but to  many citizens the information is confusing or incomprehensible. This chapter acquaints  students with the basic language of macroeconomics and national income accounting.  GDP is defined and explained. Then, the differences between the expenditure and  income approaches to determining GDP are discussed and analyzed in terms of their  component parts. The income and expenditure approaches are developed gradually  from the basic expenditure-income identity, through tables and figures. The importance of investment is given considerable emphasis, including the nature of  investment, the distinction between gross and net investment, the role of inventory  changes, and the impact of net investment on economic growth. On the income side,  non-income charges—depreciation and indirect business taxes—are covered in detail  because these usually give students the most trouble. Other measures of economic activity are defined and discussed, with special emphasis 
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Chapter 6 - MeasuringDomesticOutputandNationalIncome...

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