Comparing the expenditure and value-added approaches for calculating GDP?
The expenditure and value-added approaches for calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate this, think about the effects of the transactions in the following story about GDP: -Daesun pays Most Foods Market $1,200 to cater his daughter's engagement party. He's attracted by Most Foods Market's guarantee that he'll be happy with the catering, or he'll get his money back. -Most Foods Market pays JoAnn's catering $850 to cater the party -JoAnn's Catering buys plasticware worth $200 from Kostko Assume that Kostko gets the plasticware for essentially nothing and the other costs are $0. To compute the contribution to GDP using the expenditure approach, you have to add the amount of money spent by buyers on final goods and services. Which of the following would be included in the expenditure method of calculating GDP? Check all that apply. A. Most Foods Market spends $850 B. Daesun spends $1,200 C. JoAnn's Catering spends $200 The total contribution to GDP, measured by the expenditure method, is__________. Now use the following table to compute the contributions to GDP for the economy using the value-added approach. In particular, indicate the cost of intermediate goods and teh value added at each stage of production. Stage of Production Sale Value Cost of intermediate Goods Value added Kostko $200 - _______ JoAnn's Catering 850 ___________ _______ Most Foods Market 1,200 ____________ _________ The contribution to GDP that you found using the expenditure approach corresponds to the sum of the _____________ at each stage of production. A. Sale value B. Value added C. cost of intermediate goods
The expenditure approach to measuring GDP sums?
a. consumption, investment, government purchases, and net exports. b. sales, revenues, income, and wages. c. profits, compensation of employees, consumption, and investment. d. net exports, consumption, wages, and salaries.
Use the expenditure approach to calculate GDP for this economy?
Consider the hypothetical data below: Profits and Proprietors' income $70 billion Interest $50 billion Consumption $300 billion Wages $370 billion Rents $10 billion Gross Investment $120 billion Government purchases $100 billion Consumption of fixed capital $40 billion Net exports -$20 billion
Compared with the expenditure approach to calculating GPD, the income approach is?
Equally flawed.
How is national income calculated in India?
Income can be measured by Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP) and Net National Income (NNI).In India the Central Statistical Organization has been formulating national income.However some economists have felt that GNP has a measure of national income has limitation, since they exclude poverty, literacy, public health, gender equity and other measures of human prosperity.Instead they formulated other measures of welfare like Human Development Index (HDI)Calculating National IncomeThere are various methods for calculating the national income such as production method, income method, expenditure method etc.Production MethodThe production method gives us national income or national product based on the final value of the produce and the origin of the produce in terms of the industry.All producing units are classified sector wise.Primary sector is divided into agriculture, fisheries, animal husbandry.Secondary sector consists of manufacturing.Tertiary sector is divided into trade, transport, communication, banking, insurance etc.Income Method: Different factors of production are paid for their productive services rendered to an organization. The various incomes that includes in these methods are wages, income of self employed, interest, profit, dividend, rents, and surplus of public sector and net flow of income from abroad.Expenditure Method:The various sectors – the household sector, the government sector, the business sector, either spend their income on consumer goods and services or they save a part of their income. These can be categorized as private consumption expenditure, private investment, public consumption, public investment etc.Difficulties in Calculation of National IncomeIn India there are various difficulties in calculating the national incomes .The most severe one is the finding of reliable data. Most of the time, it is based on assumptions. Soon after independence the National Income Committee was formed to collect data and estimate National Income. The two major problems which remain in the calculation of National Income are:Most of the data is not from the current year.Even if current data are available then values are under reported.hope I helped :)
Calculate gdp final goods approach?
2. Suppose that the production of orange juice in Farmville requires the following steps: a. An orange farmer sells $10,000 worth of oranges to a processer in Florida. b. The processer sells $12,000 worth of orange juice concentrate to a bottler in New Jersey. c. The bottler sells $14,000 worth of orange juice to the distributor. d. The distributor sells $15,000 worth of orange juice to a grocer. e. The grocer sells $20,000 worth of orange juice to final consumers. Assume that orange juice is the only good or service produced in Farmville. SO i've already calculated the GDP through value-added approach, but I dont know how to do it through final goods approach. does anyone mind helping me? thanks in advance!
Why are the GDP approaches equivalent?
Because of the concept of circular flow of income.Assume a simple economy consisting of just individuals and businesses with no government. Individuals provide labor to businesses and are entitled to wages and profits from the businesses. All income is spent on output produced. GDP in this economy is the total value of output produced by the businesses.You can calculate this output by estimating how much households spend on the output of the firm - expenditure approach.Or by estimating how much income the household make - income approach.Since all income earned by businesses go to individuals in the form of wages, profits and interest payments. And individuals spend all their income on output of businesses both approaches will yield the same result.The value-added approach estimates output by summing up value added at each stage of the production process.In theory all three should be equivalent but in reality there are discrepancies but very similar.
How do i calculate the total GDP contribution.?
Final output approach: Total contribution is $4 million (=final sales) Value added approach: [Stage 1] American Paper Company = +$1 million [Stage 2] Professor = +$0.5 million [Stage 3] College Book Corporation = Output - Used input = = $3m - $1m - $0.5m = +$1.5 million [Stage 4] College bookstores value added = Output - Used input = = $4m - $3m = +$1 million Total contribution = Stages 1+2+3+4 = 1m+0.5m+1.5m+1m = +$4 million
Which of the following is added to arrive at GDP using the expenditure approach?
Using the expenditure approach GDP = C + I + G + (X-M) By convention, GDP values things at their market value or how much is paid for them. Clearly a,b and c are all unpaid, so aren't (normally) counted in GDP. Answer d is (X-M), which you can see in the equation I have given above, so it must be the answer!