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ECON 1010 Lecture Notes - Aggregate Demand, Income Approach, Government Spending

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jadeplatypus42
29 Apr 2013
School
University of Manitoba
Department
Economics
Course
ECON 1010
Professor
Sarrah Vakili

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ECON 1010 Full Course Notes
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ECON 1010 Full Course Notes
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Document Summary

We need information on how much spending, income and output is being created in an economy over a period of time. National income data gives us this information as we see in this chapter. To measure how much output, spending and income has been generated in a given time period we use national income accounts. National income measures the money value of the flow of output of goods and services produced within an economy over a period of time. Measuring the level and rate of growth of national income (y) is important to economists when they are considering: Changes over time to the average living standards of the population. Changes over time to the distribution of income between different groups within the population (i. e. measuring the scale of income and wealth inequalities within society) Gross domestic product (gdp) measures the value of output produced within the domestic boundaries of the uk over a given time period.

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Related Questions

Gross Domestic Product (GDP) only measures the value of marketed goods and services for a country during a given period of time.

Is the GDP measure underestimating or overestimating national production and total income in the economy? Why?

What are the limitations of the GDP in measuring total output and national welfare? What products (services) are excluded from the GDP computation?

Topic 1: GDP and Its Limitations

The national income accounts measure productivity, spending, and income; but these accounts were not designed to measure economic welfare. GDP only measures the value of marketed goods and services for a country during a given period of time. Goods and services that are not sold in markets, such as food produced and consumed at home and household articles, are not included in GDP. Discuss aspects of economic welfare ignored in GDP measurement.

Discussion Checklist:

A.) What are the limitations of the GDP in measuring total output and national welfare?

B.) What products (goods and services) are excluded from the GDP computation?

C.) What are the impacts of the shortcomings of the GDP as a measure of the national product and national welfare?

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.