econ209 - 20. firmsinputs o o

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20.1 National output and value adds Productions occurs in stages-most firms produce outputs that are outer  firms’ inputs o Intermediate      products-all outputs that are used as imputs o Final      products-produced to sold for C I G or X GDP is he value of the final  goods and services produced  in the domestic   economy Includes addictions to inventory (since produced  that year) Includes exports or of intermediate goods-they are the final sales for  the domestic economy Excludes imported final goods-not produced at home Problem     : can be hard to distinguish between final; goods and intermediate  goods (e.g. what is milk?) The problem of double counting  is avoided by measuring total output as  the sum of value added Each firm’s contribution to total output is its value added =revenues - cost of intermediate goods =incomes to factors of productions at the firms *the total value added gives us Gross Domestic product 20.2 National income accounting the basics Three methods for measuring nation income (output): Total value added  from domestic production Total expenditures  on domestic output Total income  generated by domestic production Because of the circular flow of income these measure should yield the  same thing-GDP
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GDP from the expenditure side -Consider adding up the expenditure needed to purchase the final output  produced in any given year There are four broad expenditure categories Consumption
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econ209 - 20. firmsinputs o o

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