Please enable JavaScript.
Coggle requires JavaScript to display documents.
Level of Economic Activity (Uses of National Income Statistics (Indicates…
Level of Economic Activity
Circular Flow of Income
Expenditure approach: sum of all spending (GDP)
Output approach: value of all final G&S
Income approach: all income earned by FOP (National income)
GDP: Market value of all final G&S produced within the country
Real: valued at current prices
Nominal: valued at constant prices
GNP: Market value of all final G&S produced by productive factors owned by residents of the coutnry
Uses of National Income Statistics
Indicates a country's economic performance
Helps governments to formulate policies
Helps private firms to prepare for investment
Indicates standard of living (material welfare)
Problems in using nat income stats to measure SoL
Measurement problem
Data collection
Underground economy (unrecorded transactions)
Non-market economy
DIY projects
Subsistence agriculture
Interpretation problem
Composition of output (SoL only relates to consumption)
Distribution of GDP
External costs
Leisure time
Problems in measuring welfare between countries
Measurement
Different statistical processes (Anglo-American vs communist)
Inaccuracy of national income figures
Interpretation
Diff in domestic price levels
Diff in income distribution
Diff in leisure time vs work time
Diff in external costs
Diff in proportion of national income spent on different types of expenditure