Economic Indicators and Measurements



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What is GDP?

    • Microeconomics examines actions of individuals and single markets
    • Macroeconomics examines the economy as a whole and how healthy the economy is.
    • Macroeconomists use national income accounting:

What is GDP?

  • The Components of GDP
    • GDP
      • market value of final goods & services produced in a set time period (usually quarterly)
    • To be included in GDP, product must fulfill three requirements:

Three Methods for Calculating GDP

  • Production Method - The value added created in all the sectors of the economy.
  • Expenditure Method - The sum of the domestic spending on final goods (less domestic demand satisfied by imports).
  • Income Method – The Wage, Rent, Interest and Profit Income generated by the domestic economy.

Production Method

  • At the plant level, Value added =
    • Sales + Change in inventories
    • - materials, intermediate inputs and energy costs.
  • Value added at the firm level is directly taxed in the EU (VAT)
  • GDP is the sum of VA across establishments.
  • The value of a final good is equal to the value added at each stage of production.

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