“Value Added” in the Lower Loop

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“Value Added” in the Lower Loop who is being trained to make COP measurements , might be puzzled, saying: I can see that, if you are careful, your upper-loop product approach to GDP will avoid including intermediate products. But aren’t you in some trouble when you use the lower-loop cost or earnings approach. After all, when we gather income statements from […]

The Problem of “Double Counting”

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The Problem of “Double Counting” We defined GOP as the total production of final goods and services. A final product is one that is produced and sold for consumption or investment. GOP excludes in goods goods that are used up to produce other goods. GOP therefore includes bread but not wheat, and home computers but not computer chips. What has happened […]

Notional Accounts Derived from Business Accounts

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Notional Accounts Derived from Business Accounts You might wonder where on earth econosaists find all the data for the national accounts. In practice, government economists draw on a wide array of sources, including surveys, income-tax returns, retailsales statistics. and employment data. The most important source of data is business accounts. An account for a firm or nation is […]

Earnings or Cost Approach

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Earnings or Cost Approach The second and equivalent way to calculate GDP is the earnings or cost approach. Go to the lower loop in Figure 21-1. Through it flow all the costs’ of doing business; these costs include the wages paid to labor, the rents paid to land, the profits paid to capital, and 50 forth. But these , business […]

Flow of Product Approach

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Flow of Product Approach Each year the public ,consumes’ a wide variety of final goods and services: goods such as,apples, computer software, and blue jeans; services such as health care and haircuts. We include only final good goods ultimately bought and used by consumers. Households spend their incomes for these consumer goods. as is shown in the. upper loop of Figure […]

Two Measures of National Product: Goods Flaw and Earnings Flow

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Two Measures of National Product: Goods Flaw and Earnings Flow How do economists actually measure GOP? One of the. major surprises is that we can measure GOP in two entirely-independent ways.As Figure 21-1 shows GOP can be measured either as a flow of products or as a sum of earnings. To demonstrate the different ways of measuring GOP, we begin by […]

Measuring Economic Activity

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GROSS DOMESTIC PRODUCT THE YARDSTICK OF AN ECONOMY’S’ PERFORMANCE What is. the gross domestic product? GDP is the name we give to the total market value. of the final goods and services produced within a nation during a given year. It is . the figure you get when you apply the measuring rod of money to the diverse’ goods and services-from apples to zithers-that […]