EC140 Lecture Notes - Lecture 20: Counting Measure, Retained Earnings, Gdp Deflator

21 views3 pages

coppermuskrat283

26 Jun 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

meghan78 and 39778 others unlocked

EC140 Full Course Notes

Verified Note

21 documents

Document Summary

Total value added in an economy is equal to the value of all final goods produced. Gdp = total production in a country (goods and services) If all production was sold and consumed by one person, gdp would be easy to measure. Outputs of one company are input to another. (cid:373)easuri(cid:374)g (cid:448)alue of (cid:862)output(cid:863) (cid:272)ou(cid:374)ts o(cid:374) so(cid:373)e output (cid:373)ore tha(cid:374) o(cid:374)(cid:272)e. To avoid double counting measure value added by all firms. Value added = sales revenue cost of intermediate goods. Value added = wages paid to workers + profits paid to owners. Total value added is a measure of total output. Gdp (total value of final goods/services produced) = value of expenditure on output. Also = income generated by producing that output. Goods not for current consumption; inventory, plant/equipment, housing. In a large economy there will always be a discrepancy - #s will be off. Total exports total imports; count goods and services.

Related Questions

In a given year, we find the value of final goods and services produced in the economy is $15t. Your professor told you that this is the expenditure approach to measuring GDP. He also told you we can measure GDP using the value of all the incomes generated from that production, but when you do, the dollar value of incomes is less than $15t. Please explain why this is so AND how this problem is corrected.

yellowwoodchuck103

Intermediate goods are goods and services that are purchased for resale or for further processing or manufacturing. Final goods are consumer goods, capital goods, and services that are purchased by their final users, rather than for resale or for further processing or manufacturing. Including the value of intermediate goods in the measure of real GDP would amount to multiple counting, and therefore distort the value of GDP. Value added is the market value of a firm’s output less the value of the inputs the firm has bought from others.

Using the table below, calculate the total sales values, value-added, and fill in the missing boxes. The product is assembled for sale is a fancy wool suit.

Stages of Production	Sales Value of Materials or Product	Value Added
	$0
Firm A: Sheep Ranch		$120
Firm B: Wool Processor	$180
Firm C: Suit Manufacturer	$220
Firm D: Clothing Wholesaler		$50
Firm E: Retail Clothier (Market)		$80
Total Sales Value
Total Value Added

amethysttrout886

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?

ochrewolf599

EC140 Lecture Notes - Lecture 20: Counting Measure, Retained Earnings, Gdp Deflator

EC140 Full Course Notes

Document Summary

Get access

Related Documents

EC140 Lecture Notes - Lecture 3: Environmental Quality, Gdp Deflator

EC140 Lecture Notes - Lecture 19: Retained Earnings, Black Market, Delator

ECON 295 Lecture Notes - Lecture 3: Gross National Product, Civil Service, Income Approach

Related Questions