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19 Cards in this Set
- Front
- Back
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What do the National Income Accounts do?
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Show the State of the Economy over a specific time (usually year) / Used as an indicator of living standards
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What do they measure
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• Total Value of output • Total Expenditure • Total Income Generated
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What is the GDP
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Measure of Strength of a Nation • Measures value of outputs produced by factors of production in the domestic economy, regardless of who owns the factors •
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What are the three Measurements of Economic Activity 1)
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• Expenditure Method - Sum of Expenditure on Final goods produced
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Measurement of Economy 2)
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• Income Method - Sum of Final Incomes earned through production of goods and services - Includes Income from employment + Profits of companies + Rent Income = GDP, No Transfer Payments included
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Measurement of Economy 3)
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• Output Method - Measures sum of Value Added to all productive sectors
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Issues with Measuring GDP 1)
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Doesn't measure output that isn't paid for
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Issues with Measuring GDP 2)
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Black Market is excluded
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Issues with Measuring GDP 3)
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Government output is excluded
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Issues with Measuring GDP 4)
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Income Disparity is not measured
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What is the Difference between GDP and GNP
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GNP = GDP + Net Property Income from Abroad (NPIA) • NPIA = Net Balance of Interest Profits and Dividends owned overseas - Net Balance sent overseas • Take out depreciation to get Net National Product
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What is the GNP Deflator and what does it do
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The GNP Deflator converts Nominal economic activity to real economic activity. The Deflator measures changes in C,I,G,X, and M
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Limitations of GDP when measuring Living Standards 1)
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Regional Variations in income and spending
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Limitations of GDP when measuring Living Standards 2)
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Income and Wealth Inequality
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Limitations of GDP when measuring Living Standards 3)
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Economic Growth, Externalities, Quality of Products
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Limitations of GDP when measuring Living Standards 4)
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Leisure and Working Hours
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Limitations of GDP when measuring Living Standards 5)
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Consumption / Investment Balance
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Limitations of GDP when measuring Living Standards 6)
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Black Market is Excluded and so is non-monetized sectors
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Circular flow of spending and Income
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