Ragan Chapter20
Chapter 20 :
The Measurement of National Income
Copyright © 2014 Pearson Canada Inc.
Chapter Outline/Learning Objectives
Section
Learning Objectives
After studying this chapter, you will be able to
20.1 National Output and Value Added
1.
see how the concept of value added solves the problem of "double counting" when measuring national income.
20.2 National Income
Accounting:
The Basics
2.
explain the income approach and the expenditure approach to measuring national income.
20.3 National Income
Accounting:
Some Further Issues
3.
explain the difference between real and nominal GDP and understand the GDP deflator. discuss the many important omissions from official measures of GDP. understand why real per capital GDP is a good measure of average material living standards but an incomplete measure of overall well-being.
4.
5.
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 2
20.1 National Output and Value Added
Production occurs in stages—most firms produce outputs that are other firms' inputs
• intermediate products – outputs also used as inputs by other firms • final products – outputs not used as inputs by other firms
Each firm’s contribution to total output is its value added
Value added = revenues — non-labour costs
(cost of intermediate goods)
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 3
The concept of value added avoids the problem of double counting when measuring total output.
The sum of all values added in an economy is a measure of the economy’s total output, called Gross Domestic Product (GDP).
APPLYING ECONOMIC CONCEPTS 20-1
Value Added Through Stages of Production
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 4
20.2 National Income Accounting: The Basics
Three methods for measuring national income (output):
• total value added from domestic production
• total expenditures on domestic output
• total income generated by domestic production
Because of the circular flow of income, these three measures
The Measurement of National Income
Copyright © 2014 Pearson Canada Inc.
Chapter Outline/Learning Objectives
Section
Learning Objectives
After studying this chapter, you will be able to
20.1 National Output and Value Added
1.
see how the concept of value added solves the problem of "double counting" when measuring national income.
20.2 National Income
Accounting:
The Basics
2.
explain the income approach and the expenditure approach to measuring national income.
20.3 National Income
Accounting:
Some Further Issues
3.
explain the difference between real and nominal GDP and understand the GDP deflator. discuss the many important omissions from official measures of GDP. understand why real per capital GDP is a good measure of average material living standards but an incomplete measure of overall well-being.
4.
5.
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 2
20.1 National Output and Value Added
Production occurs in stages—most firms produce outputs that are other firms' inputs
• intermediate products – outputs also used as inputs by other firms • final products – outputs not used as inputs by other firms
Each firm’s contribution to total output is its value added
Value added = revenues — non-labour costs
(cost of intermediate goods)
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 3
The concept of value added avoids the problem of double counting when measuring total output.
The sum of all values added in an economy is a measure of the economy’s total output, called Gross Domestic Product (GDP).
APPLYING ECONOMIC CONCEPTS 20-1
Value Added Through Stages of Production
Copyright © 2014 Pearson Canada Inc.
Chapter 20, Slide 4
20.2 National Income Accounting: The Basics
Three methods for measuring national income (output):
• total value added from domestic production
• total expenditures on domestic output
• total income generated by domestic production
Because of the circular flow of income, these three measures