![]() When using the expenditures approach, “C” is the category of GDP that is spending by households on final goods and services in a given year but excludes spending on new housing But when Acme Motor Company buys tires to build a car that they plan on selling, those tires would be considered intermediate goods. Goods that are used in the production of a final product for example, tires are final goods when Katherine buys them at the tire store. The goods and services that are purchased by consumers, businesses, the government, or other countries in their final form for their intended final use for example, a car purchased by a household, a haircut, or a laptop bought by a student. Īn approach to calculating GDP that involves adding up all of the income earned within the borders of a country in a given year the income approach adds up wages, rents, interest, and profits.Īn approach to calculating GDP that involved adding up all of the value added at various stages of production for example, in the production of a cake that sells for $ 12 \$12 $ 1 2 dollar sign, 12, the value-added approach counts the value of the raw ingredients that a farmer sells to the baker ( $ 4 \$4 $ 4 dollar sign, 4 ), which a baker then combines with her capital to create a cake, which adds $ 8 \$8 $ 8 dollar sign, 8 in value. One of the three approaches to calculating GDP that involves adding up all spending on final goods and services in an economy the expenditures approach categories this spending into five categories: consumption, investment, government spending, exports, and imports: Y = C + I + G + X − M Y=C+I+G+X-M Y = C + I + G + X − M Y, equals, C, plus, I, plus, G, plus, X, minus, M. 2 6 4 trillion dollar sign, 2, point, 264, start text, space, t, r, i, l, l, i, o, n, end text in 2016, this means that this is the value of all new goods and services that were produced inside the border of India, excluding intermediate goods, during 2016. ![]() Most of his income was, and continues to be, from gambling.The market value of the final production of goods and services within the geographic borders of a country in a given period for example, if the GDP of India is $ 2.264 trillion \$2.264\text $ 2. ![]() Question: A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. Question: Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. Question: Most goods and services produced at homeĪnswer: and most goods and services produced illegally are excluded from GDP. Production of good A contributesĪnswer: 3/4 times as much to GDP as the production of good B. Question: Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells at $2 per unit. Question: Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. Question: According to the circular-flow diagram GDPĪnswer: can be computed as the total income paid by firms or as expenditures on final goods and services.Īnswer: value of all final goods and services produced within a country in a given period of time. ![]() Question: In a simple circular-flow diagram, households buy goods and services with the income they get from Question: In a simple circular-flow diagram, firms use the money they get from a sale to Question: In a simple circular-flow diagram,Īnswer: households spend all of their income.Īll goods and services are bought by households.Įxpenditures flow through the markets for goods and services, while income flows through the markets for the factors of households. ![]()
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