Measuring Economic Activity

Front 1

National Income and Product Accounts are...?

Back 1

Body of Statistics that help policy makers determine an economy is contracting or expanding and if a recession or sudden inflation wait in the wings.

Front 2

GDP Measures...

Back 2

a Nation's Output or
the Total Market Value
of Goods and Services
produced during a Given Year
*that help us to determine the level of economic activity/development, giving an over all picture.

It is the total money value of the flow of final products produced by the nation.

Front 3

GDP =

Back 3

C + I + G + X
Consumption + Gross Investment + Government Purchases of Goods and Services + Net Exports

Front 4

Circular Flow of Economic Activity

Back 4

Links Consumers and Producers in terms of two currents of activity.

Comprised of upper loop (flow of final products) and lower loop (flow of costs) that must be equal.

Counterpart to circular flow of S & D

Note: simplified to consumption goods at the exclusion of investment, government, and foreign sector

Front 5

Earnings Flow or Cost Approach

Back 5

the annual flow of costs of output: earnings that businesses pay out in wages, rent, interest, dividends, and profits

Front 6

Goods Flow or Flow-of-Product Approach

Back 6

the total dollar spending each year by purchasers of final goods and services.

Front 7

Final Goods

Back 7

Goods Ultimately bought and used by consumers. (add dollars spent to arrive at simplified economy's total GDP)

Front 8

Total of Factor Earnings

Back 8

Second approach to GDP, is the sum of wages, interest, rents, and profits, that are costs of producing society's final goods.

Front 9

Final Product vs. Intermediate Good

Back 9

a. produced and sold for consumption or investment while,
b. good used up to produce other goods

*** Intermediate goods are excluded for the flow-of product calculation of GDP to avoid double counting.

Front 10

"Value Added in Lower Loop (cost or earnings approach)"

Back 10

is the difference btwn a firm's sales and purchases of materials and services from other firms.

*to avoid double counting, we measure the value added at each stage taking care to subtract expenditures on intermediate goods bought from other firms.