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Chapter 6 - National Income Accounting measures the...

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National Income Accounting- measures the economy’s overall performance. Bureau of Economic Analysis- compiles the national income accounts. Purpose: 1. Assess the health of the economy by comparing levels of production at regular intervals. 2. Track long-run course of the economy. 3. Formulate policies to safeguard and improve the economy’s health. Gross Domestic Product- the total market value of all final goods and services produced in a given year. 1. Includes all goods and services produced by either citizen supplied or foreign supplied resources employed within the country. 2. Measured in monetary terms. 3. Avoid multiple counting- must count what is produced in a given year only once, therefore, count only value of final goods, not intermediate. a. Final goods- goods purchased for final use, not for resale or further processing or manufacturing. b. Intermediate goods- purchased for resale or further processing. 4. Excludes nonproduction transactions a. Financial transactions i. Public transfer payments- social security, welfare, veteran’s benefits. ii. Recipients contribute nothing to current production iii. Private transfer payments- ‘gifts’ produce no output iv. Stock market transactions- buying and selling of issued stock is excluded because no production occurred. Brokers services are included. Methods of Counting GDP 1. Expenditures Approach- add all spending on final goods and services. 2. Income Approach- add all income earned by producing output.
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