Week_2_-_GDP - 1 ECMA06 National Income Measurement of...

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1 ECMA06 – National Income Measurement of National Income – GDP Outline Why we want to measure output? The 3 approaches to measure national income: The expenditure approach. The income approach. The value-added approach. Other issues related to national income: Gross national income vs. net national income. GDP vs. GNP. Nominal GDP vs. Real GDP. GDP deflator.
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2 Why We Want to Measure Output? A measure of the country’s economic activity – what kind of goods and services we produced? What are the levels of production? A simple way to measure our standard of living and compare it to other countries. How To Measure Aggregate Output We call the aggregate output as Gross Domestic Product (GDP) – the total value of goods and services produced in the economy during a given period. There are 3 ways to measure GDP: 1) The expenditure approach Use by the government 2) The income approach 3) The value added approach
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3 ECMA06 – National Income The Expenditure Approach The expenditure approach, sometime called gross domestic expenditure (GDE), adds up the expenditure needed to purchase the final output produced during a given period. Total expenditure is the sum of 4 major broad categories: 1) Consumption (C) – spending by households on goods and services. 2) Investment (I) – spending on goods that are not for present consumption. There are 3 types of investment: i) Business fixed investment – the purchases of capital equipments, machinery and production plants. ii) Residential investment – the building of new houses. iii)
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This note was uploaded on 12/21/2011 for the course ECONOMICS ECMA06 taught by Professor Dr.atamazaheri during the Spring '10 term at University of Toronto- Toronto.

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Week_2_-_GDP - 1 ECMA06 National Income Measurement of...

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