BEYOND THE NATIONAL ACCOUNTS

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BEYOND THE NATIONAL ACCOUNTS Advocates of the existing economic and social system often argue that market economies have produced ‘a growth in real output never before seen in human history. “Look how GDP has grown because of the genius of free markets,” say the admirers of capitalism. In recent years, economists have begun developing new measures to correct the major defects […]

Saving and Investment

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Saving and Investment As we have seen, output can be’ either consumed or invested. Investment is an essential economic activity because it increases the capital stock available for future production. One of the most important points about national accounting is the identity between saving and investment. We will show that, under the accounting rules described above, saving is-exactly equal to measured […]

Disposable Income

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Disposable Income Second important concept asks, How many dollars per year do households actually have available to spend? The concept of disposable personal income (usually called disposable income; or DI) answers this question. To get disposable income, you calculate the market and transfer incomes received by households and subtract personal taxes. Figure 21-4 shows the calculation of DI. We begin with national income […]

National Income

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National Income To help us understand the division of total income among the different factors of production, we construct data on national income (XI). NI represents the total incomes received by labor, capital, and land. It-is constructed by subtracting depreciation and indirect taxes from GI National income equals total compensation of labor, rental income, net interest, income of proprietors, and corporate profits. The […]

flow of Cost Approach

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flow of Cost Approach Now turn to the right-hand side of the table, which gives the lower-loop, flow-ofcost approach. Here we have all net costs of production plus taxes and depreciation. Wages and other employee supplements include all take-home pay, fringe benefits, and taxes on wages. Net interest is a similar item. Remember that interest on government debt is not included as […]

Flow-of-Product Approach.

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Flow-of-Product Approach. Look first at the left side of the table. It gives’ the upper loop. flow of product approach to GDP. Each of the four major components appears there, along with the production in each component for 1999. Of these, C and G and their obvious sub classifications require little discussion. Finally, note the large negative entry for net […]

Gross Domestic Product Net Domestic Product and Gross National Product

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Gross Domestic Product Net Domestic Product and Gross National Product Although GDP is the most widely used measure of national output in the United States, two other concepts are frequently cited: net domestic product and gross national product. Recall that GDP includes gross investment, which is net investment plus depreciation. A little thought that including depreciation is rather like including wheat as […]

A Numerical Example

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A Numerical Example We can use a simple farming economy-to understand how the national. accounts work. Suppose that A Monrovia produces 100 bushels of com and 7 bushels are imported. Of these, 87 bushels are consumed (in C), 10 go for government purchases to feed the army (as G), and 6 go into domestic investment as increases in inventories- (I). In addition, […]