Chapter 10 - GDP and economic growth. We will be calculating how economists estimate a country’s output and income for a year. The importance of these figures will be discussed, as well as the differences between the various ways that we can measure income. Lastly we will discuss how we can adjust the figures that we have calculated for inflation effects and analyze some of the issues associated with the various accounts. | Chapter 10 GDP and Economic Growth McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved We will be calculating how economists estimate a country’s output and income for a year. The importance of these figures will be discussed, as well as the differences between the various ways that we can measure income. Lastly we will discuss how we can adjust the figures that we have calculated for inflation effects and analyze some of the issues associated with the various accounts. Gross Domestic Product Measure of aggregate output Monetary measure Avoid multiple counting Market value of final goods Ignore intermediate goods Count value added 10- The primary measure of the economy’s performance as a whole is its aggregate output. This is most commonly calculated as gross domestic product, or GDP. GDP is a monetary measure in that everything is valued in dollars. All goods and services produced must be converted into dollar values for GDP to work. To avoid multiple counting of goods, GDP includes only the market value of final goods and ignores intermediate goods, which are goods purchased either for resale or for further processing into final goods. GDP could also avoid multiple counting by counting only the value added at each stage. Value added is the market value of a firm’s output less the value of the inputs that the firm purchased from others. Gross Domestic Product LO1 Year Annual Output Market Value 1 3 sofas and 2 computers 3 at $500 + 2 at $2000 = $5500 2 2 sofas and 3 computers 2 at $500 + 3 at $2000 = $7000 Comparing Heterogeneous Output by Using Money Prices 10- This table illustrates comparing heterogeneous output by using money prices. By converting the quantity of goods into a monetary measure, we are able to compare the relative value of the vast number of goods and services produced in different years. Gross Domestic Product Exclude financial transactions Public transfer payments Private transfer payments . | Chapter 10 GDP and Economic Growth McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved We will be calculating how economists estimate a country’s output and income for a year. The importance of these figures will be discussed, as well as the differences between the various ways that we can measure income. Lastly we will discuss how we can adjust the figures that we have calculated for inflation effects and analyze some of the issues associated with the various accounts. Gross Domestic Product Measure of aggregate output Monetary measure Avoid multiple counting Market value of final goods Ignore intermediate goods Count value added 10- The primary measure of the economy’s performance as a whole is its aggregate output. This is most commonly calculated as gross domestic product, or GDP. GDP is a monetary measure in that everything is valued in dollars. All goods and services produced must be converted into dollar values for GDP to work. To .
