294 chapter 11 measuring economic performance 11 286

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Unformatted text preview: e are saying that instead of using the $400 figure, we are using the $1,200 figure. 294 Chapter 11 Measuring Economic Performance 11 (286-309) EMC Chap 11 EXHIBIT 11/17/05 11-6 Consumption $8.534 6:05 PM Page 295 To calculate GDP we add several expenditures, then subtract one. What is the expenditure that we subtract rather than add? Computing GDP (2005, in trillions of dollars) trillions dollars) + Investment $2.085 + Government purchases $2.260 + Export spending $1.210 – Import spending $1.938 GDP $12.151 Is Every Good That Is Produced Also Sold? Our definition of GDP is the total market value of all final goods and services produced annually in an economy. However, we measured the GDP by finding out how much the four sectors of the economy spend on goods and services. Suppose something is produced but not purchased. Is it included in GDP or not? For example, a car company produces 10,000 new cars this year, but the household sector chooses to buy only 8,900 of the 10,000 cars. That means that some cars (1,...
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