Macro 5 - National Income Accounting(chapter 5 Gross...

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National Income Accounting (chapter 5) Gross Domestic Product -The gross domestic product is the most comprehensive measure of a nation’s total output of goods and services. It is the sum of the dollars values of consumption ( C ), gross investment (I), government purchases of goods and services (G), and net exports (X) produced within a nation during a given year. -GDP = C + I + G + X Two Measure of National Product: Goods Flow and Earnings Flow -Flow of Product Approach (Upper loop) -GDP is defined as the total money value of the flow of final products produced by the nation -Earnings or Income Approach (lower loop) -GDP is the total of factor eaarnings that are the costs of producing society’s final products *Both approached yield exactly the same measure of GDP The Problem of “Double Counting” -GDP excludes intermediate goods, goods that are used up to produce other goods. -In making lower-loop earnings measurements, we include in GDP only a firm’s value added.
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