expenditure method.pptx
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The expenditure method calculates GDP by summing expenditures in the economy across four components: personal consumption, gross private domestic investment, government consumption and gross investment, and net exports. Personal consumption includes household spending on goods and services. Gross private domestic investment includes business spending on machinery, equipment, and housing construction. Government consumption and gross investment includes government spending on goods, services, and infrastructure projects. Net exports is exports minus imports, representing the value of domestically produced goods and services sold abroad less the value of foreign-produced goods and services purchased domestically.
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GDP can be measured in three ways:
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3) The expenditure method measures total expenditure on final goods and services in an economy through consumption, investment, exports and government spending.
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3) GDP can be measured using the production, income, or expenditure approaches, which should all equal the total value of final goods and services produced domestically in a given time period.
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National income can be measured using three methods:
1) The value added or product method measures the market value of final goods produced. It deducts intermediate goods and costs from total output.
2) The income method measures payments (rent, wages, interest, profit) to factors of production. It sums labour income, capital income, and mixed income.
3) The expenditure method measures total domestic expenditure by summing household consumption, investment, government spending, and exports minus imports.
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National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. National income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of
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The document discusses national income accounting and macroeconomic aggregates. It defines GDP as the total market value of final goods and services produced domestically in a given period. GDP can be measured through the expenditure, income, and production approaches. Key components of GDP include personal consumption, private investment, government spending, and net exports. The circular flow diagram models the flows of money between households and firms.
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Eco 1242 1642 notes 2022.pptx
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National income measures the total value of goods and services produced in an economy over a period of time. It is important for economists to measure national income to assess economic growth, changes in living standards, and income inequality. National income can be measured using the expenditure approach, income approach, and value-added approach. The expenditure approach defines GDP as the total final expenditures by consumers, investors, the government, and net exports. The income approach defines GDP as the sum of all incomes received by producing factors. The value-added approach defines GDP as the sum of the value added from all sectors of the economy.
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The document discusses different methods of measuring national income:
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3) The expenditure method measures total expenditure on final goods and services in an economy through consumption, investment, exports and government spending.
National Income Accounting
Gross national product (GNP) is a measure of a nation's total economic output. It can be calculated using the expenditure approach, which adds up all consumption, investment, government spending, and net exports. Alternatively, GNP can be calculated using the income approach, which adds up all labor compensation, corporate profits, proprietor's income, and indirect business taxes. The national accounts of a country's economy track GNP and related indicators like gross domestic product using both expenditure and income methods.
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1) The document describes the circular flow model of the economy, which divides the economy into 4 sectors: individuals, businesses, government, and international trade.
2) It illustrates the circular flow of income between individuals and businesses, where individuals receive income from businesses for supplying labor, capital, and resources, and then spend that income on goods and services produced by businesses.
3) GDP can be measured using the production, income, or expenditure approaches, which should all equal the total value of final goods and services produced domestically in a given time period.
Circular Flow of Income
The circular flow of income shows the interconnected flows of goods, services, and money between households and firms in an economy. Households provide factor services like labor to firms and receive income, while firms produce goods and services and sell them to households. This results in a circular flow as money flows from households to firms and goods/services flow from firms to households. GDP can be measured using the income, expenditure, and production approaches, which should all equal the total value of final goods produced in an economy in a given time period when accounting properly.
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National income can be measured using three methods:
1) The value added or product method measures the market value of final goods produced. It deducts intermediate goods and costs from total output.
2) The income method measures payments (rent, wages, interest, profit) to factors of production. It sums labour income, capital income, and mixed income.
3) The expenditure method measures total domestic expenditure by summing household consumption, investment, government spending, and exports minus imports.
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- Consumption data comes from the Census Bureau's Retail Trade Survey, Survey of Manufacturers, and Service Survey which collect data from samples of retail firms, manufacturers, and service businesses.
- Investment data comes from the Census Bureau's surveys of construction industries and capital goods producers.
- Government purchase data is obtained from federal, state and local government accounts.
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National income accounting
National income accounting is a bookkeeping system that a government uses to measure economic activity within a country over a period of time. It records data such as corporate revenues, wages, and taxes. This system allows countries to assess standards of living, compare economic sectors, and analyze changes over time. There are three main methods for calculating national income: value added, income, and expenditure.
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Economic growth and development and Income
Economic growth measures the value of goods and services produced, while economic development measures human welfare. Economic growth is affected by factors like natural resources, capital formation, technology, education and political stability. Countries can be measured based on GDP, GNP, HDI and other indicators. GDP can be calculated using production, expenditure and income approaches by summing value added, expenditures and incomes. International comparisons use market exchange rates or purchasing power parity rates.
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- 2. Various methods ◦ Methods of measuring National Income. 1. Value added / Production/ Net output Method. 2.Expenditure Method. 3. Income Method.
- 3. Expenditure Method ◦The expenditure method, also known as the expenditure approach, is one of the methods used to calculate the gross domestic product (GDP) of a country.
- 4. Calculation of Expenditure Method ◦The expenditure method calculates GDP by summing up the expenditures on various goods and services by different sectors of the economy.
- 6. Components ◦ Personal Consumption Expenditure. This component represents the total spending by households on goods and services, such as food, clothing, housing, healthcare, and entertainment. It includes both durable goods (e.g., cars, furniture) and non-durable goods (e.g., food, clothing).
- 7. ◦ Gross Private Domestic Investment. This component represents the total investment expenditures by businesses within the domestic economy. It includes business investment in machinery, equipment, buildings, and inventories. It also includes residential investment, which represents spending on new housing construction. ◦
- 8. ◦ Government Consumption Expenditure and Gross Investment. This component represents the total spending by the government on goods and services. It includes both consumption expenditures (e.g., salaries of government employees, public infrastructure) and gross investment (e.g., spending on infrastructure projects).
- 9. ◦ Net Exports ◦ This component represents the difference between exports (X) and imports (M). Exports represent the value of goods and services produced domestically and sold to foreign countries, while imports represent the value of goods and services produced abroad and purchased domestically.