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3.About the “Double Counting”
n Final goods: the product that is produced and sold for consumption or investment.
n Intermediate goods: goods that are used up to produce other goods.
Q=real GDP=Nominal GDP/GDP Deflator
Example:P395,396
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Example
year Price of Output of Price of Output of hotdog($) hotdog hamburger hamburger
2001 1
10,363 233 1,281
880 884 13641
81 1505
47 15274
1790 17064
32 经济1学7原0理926(1)
9)The identity of measured saving and investment
n This is an identity of national income accounting by definition.
100
2
50
2002 2
150
3
100
2003 3
200
4
150
If the economy only includes the hotdog and hamburger production and consumption, please calculate the nominal and real GDP (based on year 2001), and the GDP deflator.
n Net Investment = Gross Investment - Depreciation
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3) Government
n Transfer Payment GDP n Government Purchases & the Official
Government Budget
Net exports Depreciation
Indirect taxes
Government
GDP
Investment
Consumption
National income
Direct taxes
Net business Transfer
saving
payment
DI
NI
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Example: GDP by income side
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1)Flow-of-product Approach
n In this measure, we only calculate the final products, not intermediate goods (avoiding double counting). If we add all the consumption spent on the final goods and services, we’ll get the two-partmode’s GDP. (as the figure: the upper loop)
n Gross Investment: the investment includes all investment goods produced. (includes depreciation which is the amount of capital that has been used up in a year)
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7) GDP, NDP, GNP
n GDP: Gross Domestic Product, the market value of all final products and services produced in a nation during one year. It includes gross investment.
n NDP: Net Domestic Product. (GDP-Depreciation)
n GNP: Gross National Product.
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conclusion
n Goods Flow (upper loop): GDP=C+I+G+X
n Earnings Flow (lower loop): GDP=Wage or other income+ Interest, Rent or other property income+ indirect taxes+ depreciation+ profit
n The result by the two ways is equal.
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Some Examples
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8) From GDP to DI
n GDP=total incomes by different factors+ indirect taxes+ depreciation
n Investment means the additions to the nation’s capital stock of building, equipment and inventories during a year. From the figure, the investment is the part of upper-loop output which is not consuming. The saving means the part of the lower-loop disposable income (or GDP) that is not spent on consumption. (assume: two-part-economy)
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3) Equivalence of the two approach
The results by the two approaches are equal. Why?
* National accounts derived from business accounts. (P.392)
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2020/12/12
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1.Outline of measuring national income
expenditure(=GDP)
Income(=GDP)
Final goods and services
Hale Waihona Puke Buying for goods
Selling for goods
n Imports means the foreign countries provide goods and services to the nation.
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6) Total national investment
Total national investment: I+X Total net national investment Net foreign investment (net exports)
2. Two measures of national output
1) Flow-of-product Approach (goods flow) 2) Earnings or cost Approach (earnings flow) 3) Equivalence of the two approaches
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2)Investment and capital formation
n Investment: the additions to the nation’s capital stock of buildings, equipment and inventories during a year.
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5) Net Exports
n Net exports: the difference between exports and imports of goods and services.
n Exports means the nation provides the goods and services to other nations.
$180
(value added)
$410
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Bread receipts, Costs, and Value added
Stage of production Sales receipts
Cost of
Value added
intermediate goods (wage, profit ,etc)
the official government budget includes government purchases and the transfer payment.
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4) Taxes
n Direct taxes n Indirect taxes
When we calculate GDP in the flow-of – cost way, we must add the indirect tax into the GDP.
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2) Earnings or costs approach
n The businesses must pay for the productive inputs: wage, rent, profit, etc. These we call the cost the business must expend. The cost are also the earnings the households receive from the business. Add all the cost we’ll get the total GDP. (as the figure: the lower loop)