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Measur ing Economic Performance

Measur ing Economic Performance. The market value of the final goods and services produced by workers and other resources located within the border of a nation over period of one year.

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Measur ing Economic Performance

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  1. Measuring Economic Performance

  2. The market value of the final goods and services produced by workers and other resources located within the border of a nation over period of one year the market value of final output produced annually by all labour and property supplied by a nation’s households, no matter where those resources are employed GDP x GNP

  3. the market value of nation’s final output based on current prices for the goods and services produced during the year an estimate of the value of a nation’s final products based on prices of certain base year Nominal GDP x Real GDP

  4. Intermediate Products and Value Added • Intermediate products – products produced by business firms for resale by other firms or for use as materials or services that will be included in the value of resold good • VALUE ADDED = the extra worth that a business firm adds to intermediate products, it is measured by the difference between the market value of a firm’s sales, and the market value of the intermediate products that the firm purchases • Total value added = market value of - market value of in a nation (GDP) all products intermediate products

  5. Computing Value Added - example

  6. METHODS OF MEASURING GDP 1) Flow-of-Product Approach(The EXPANDITURE COMPONENTS OF GDP) 2) Earnings or cost approach (The INCOME SIDE OF GDP)

  7. From NNP to Disposable Income • Net National Product • Indirect business taxes and other adjustments • National Income - corporate profits - net interest paid -social security (payroll) taxes + government transfer payments + personal interest, dividends and other transfers • Personal Income - Personal taxes = Disposable income

  8. NET ECONOMIC WELFARE • GDP • Nonmarket production • The value of leisure time • The underground economy • Cost of enviromental damage

  9. Potential output Production-possibility frontier Y unattainable waste X

  10. Tasks:1. Based on following dates calculate: GDP, NDP, NI, NX, DI

  11. 2. Calculate nominal GDP, net investment and real GDP, assuming GDP deflator 116, C = 740, a = 21, G = 305, X = 194, M = 178, indirect taxes = 289, profits = 357, wages = 481, rents = 9, net interests = 18. 3. Calculate real and nominal GDP using following dates:

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