CH6 SH - CH6. Measuring National Output & National...

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Gross Domestic Product Final Goods and Services Exclusion of Used Goods and Paper Transactions Exclusion of Output Produced Abroad by Domestically Owned Factors of Production Calculating GDP The Expenditure Approach The Income Approach Nominal versus Real GDP Calculating Real GDP Calculating the GDP Deflator The Problems of Fixed Weights Limitations of the GDP Concept GDP and Social Welfare The Underground Economy Gross National Income per Capita CH6. Measuring National Output & National Income
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GDP: One of the Great Inventions of the 20th Century While the GDP and the rest of the national income accounts may seem to be arcane concepts, they are truly among the great inventions of the twentieth century. Calculating GDP: The Income Approach, cont.d
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Measuring National Output, National Income, GDP National income and product accounts: Data collected and published by the government describing the various components of national income and output in the economy . GDP: The total market value of a country’s output. It is the market value of all final goods and services produced within a given period of time by factors of production located within a country.
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Gross Domestic Product: Final Goods and Services final goods and services Goods and services produced for final use. intermediate goods Goods that are produced by one firm for use in further processing by another firm. value added The difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage.
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In calculating GDP, we can sum up the value added at each stage of production or we can take the value of final sales. We do not use the value of total sales in an economy to measure how much output has been produced. GDP: Final Goods and Services
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Value Added in the Production of a Gallon of Gasoline (Hypothetical Numbers) Stage Of Production Value Of Sales Value Added (1) Oil drilling $3.00 $3.0 0 (2) Refining 3.30 0.30 (3) Shipping 3.60 0.30 (4) Retail sale 4.00 0.40 Total value added $4.0 0 GDP: Final Goods and Services
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GROSS DOMESTIC PRODUCT (GDP) Tires taken from that pile and mounted on the wheels of the new car before it is sold are considered intermediate goods to the auto producer. Tires from that pile to replace tires on your old car are considered final goods. If, in calculating GDP, we included the value of the tires (an intermediate good) on new cars and the value of new cars (including the tires), we would be double counting.
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GDP: Exclusion of Used Goods and Paper Transactions GDP is concerned only with new, or current, production. Old output is not counted in current GDP because it was already counted when it was produced. GDP does not count transactions in which money or
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This note was uploaded on 02/02/2012 for the course ECON 201 taught by Professor Shea during the Spring '08 term at Maryland.

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CH6 SH - CH6. Measuring National Output & National...

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