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 considering an over simplified world in which there is no government, foreign trade, or investment, For the moment, our little economy produces only assumption goods, which are . items that are purchased by households to satisfy their Wants. (Important note: Our first example is oversimplified to show the basic ideas. In the realistic examples that follow,we will add investment, government, and. the foreign sector.

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