Chapter 2 Part 1

Chapter 2 Part 1 - Chapter 2 The Measurement and Structure...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 2 The Measurement and Structure of the National Economy
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 National Income Accounting National income accounts : an accounting framework used in measuring current economic activity. These accounts are set up in a way that mirrors the structure of the economy, so they help us understand how the economy works.
Background image of page 2
3 National Income Accounting In the United States, the national income accounts are constructed quarterly by government economists and statisticians in the Bureau of Economic Analysis (BEA), a part of the Department of Commerce. BEA Website: http://www.bea.gov/
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 How to measure economic activity ? Producers Consumers $ Output Produced Incomes received Expenditures
Background image of page 4
5 How to measure economic activity ? Product Approach : measure the market value of output produced , excluding output used up in intermediate stages of production. Income Approach : measure the incomes received by the producers of output. Expenditure Approach : measure the amount spent by all end users of output.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 How to measure economic activity ? In principle, the 3 approaches should yield the same measurement of current economic activity. In practice, there might be some discrepancies due to incomplete or misreported data.
Background image of page 6
7 Example OrangeInc JuiceInc Consumers $ orange orange $ juice $
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8 Example OrangeInc Transactions Expenses: Wage bill $15,000 Tax payment $ 5,000 Revenue: Orange sold to public $10,000 Orange sold to JuiceInc $ 25,000 Total $ 35,000 JuiceInc Transactions Expenses: Wage bill $ 10,000 Tax payment $ 2,000 Oranges purchased from OrangeInc $ 25,000 Revenue: $ 40,000
Background image of page 8
9 Example : Income Approach The income approach measures economic activity by adding all the incomes generated by production, including wages received by workers (before-tax) profits received by owners of firms
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
10 Example: Income Approach OrangeInc Transactions Wage bill $15,000 Tax payment $ 5,000 Revenue Orange sold to public $10,000 Orange sold to JuiceInc $ 25,000 Total $ 35,000 Profits = Revenue - wage
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/07/2008 for the course ECON 103a taught by Professor Suen during the Winter '08 term at UC Riverside.

Page1 / 34

Chapter 2 Part 1 - Chapter 2 The Measurement and Structure...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online