September 18th - National Income Accounting

September 18th - National Income Accounting - economy Final...

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National Income Accounting – measure of national income activity can look at the economy, are the policies helping or hurting, a yardstick to evaluate government policies 1930’s Depression US – hire Kuznets who puts together economists to work on an accounting method which he later won a noble peace prize for his economic idea. Cannot simply count the items and make a long list: Example Apples Oranges 2006 10,000 7,000 2007 9,000 8,000 Need a convenient measure we look at the price of the items that are produced. GDP = Q (quantity) x P (price) Total value of goods and services over a given time period. Don’t double count, Example Car – they buy tires from Firestone; don’t want to include the tires twice that inflates the
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Unformatted text preview: economy Final Sale of the item. Used cars don’t count as part of GDP, every new service that comes with a new process is part of GDP. GDP of USA - $12 Trillion we can compare with other countries. GDP of USA - $12 Trillion (income distribution), (price) GDP of Switzerland - $1 Trillion Should be based “per capital” since the population of USA are 300million so we will produce more stuff. GDP/Population = GDP per capita. However, we must also look at the distribution of the money. GDP excludes when you mow the lawn vs when you pay someone to do it. Non-market activity. Unreported economic (the underground economy) don’t report tips....
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