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GDP is the total output by an economy. if GDP increases, it will generate more ecnomic activity, more jobs and therefore increased wages for people. With these wages, people can increase their total expenditure. Total expenditure = consumer consumption + investment + government spending + net exports with more money from income, individuals will spend more on consumption and money which was saved in banks can be used to invest in firms. the taxes people pay will go to the government to spend. this will increase total expenditure. If GDP is low, then theres less acitivity in the economy, less jobs, less wages, less taxes, more government spending and a higher deficit and therefore total expenditure decreases.
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What is the relationship between aggregate expenditure and real GDP?
There is a direct proportional relationship between aggregate expenditure and real GDP. Aggregate expenditure is actually equal to real GDP. This is different from the planned expenditure.
What gets included and excluded when calculating GDP?
total income and total expenditure are included when calculating GDP.
What is equilibrium GDP?
In the short run, equilibrium GDP is the level of output at which output and aggregate expenditure are equal
Is the value of the GDP calculated by the income approach equal to the value of GDP calculated by the expenditure method?
YES
Why imports are subtracted in the expenditure approach to calculating GDP?
why imports are subtracted inthe expenditure approach to calculating GDP
What is the relationship between aggregate expenditure and real GDP?
There is a direct proportional relationship between aggregate expenditure and real GDP. Aggregate expenditure is actually equal to real GDP. This is different from the planned expenditure.
What gets included and excluded when calculating GDP?
total income and total expenditure are included when calculating GDP.
What is equilibrium GDP?
In the short run, equilibrium GDP is the level of output at which output and aggregate expenditure are equal
Why does income equal to total expenditure and also equal to GDP?
Because GDP, which stands for Gross Domestic Product, is the dollar value of total US production (of goods and services) within a given quarter. To measure how much we've produced, we keep track of how much has been bought in the economy. Another way to say this is that we keep track of how much each sector spends. Remember that GDP = C + I + G + NX, where C is consumption by households, I in investment (business spending), G is government is spending, and NX is net exports (exports minus imports). So this is how GDP is equal to total expenditure, expenditure being another word for spending. GDP is also equal to total income because every dollar that is spent is spent to pay someone. For example, if you buy an apple at a grocery store for a dollar, some of that dollar will go to the government, some to the employees of the store, some to the business owner as profit. Every time money changes hands (in a transaction) it is the income of someone (the one who received it) and the expenditure of someone else (the one who gave it). Some possible transactions are: You get paid: you receive income equal to the expenditure of your employer; You buy something: your expenditure is equal to the income of the shop selling you the item; GDP just totals up the amount of all these transactions and so is equal to the total income or total expenditure (as both are equal) in an economy..
Is the value of the GDP calculated by the income approach equal to the value of GDP calculated by the expenditure method?
YES
Why imports are subtracted in the expenditure approach to calculating GDP?
why imports are subtracted inthe expenditure approach to calculating GDP
Why must an economy's income be equal to it's expenditure?
An economy's income must be equal to it's expenditure because every transaction has a buyer and a seller. It is also because every dollar of spending by some buyer is a dollar of income for some seller. Gross domestic product (GDP) measures an economy's total expenditure on newly produced goods and services and the total income earned from the production of these goods and services.
- What is the expenditure approach to calculate GDP?
Gdp = c + i + g + (x - m)
What is the largest expenditure component of GDP?
consumption
Formula for GDP using expenditure apporach?
GDP = C + Ig +G +Xn
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
What is difference between Autonomous Expenditure and Induced Expenditure?
AUTONOMOUS AND INDUCEDEXPENDITURE :Autonomous expenditure is independent ofchanges in real GDP, whereas induced expenditurevaries as real GDP changes. In general, a change inautonomous expenditure creates a change in realGDP, which in turn creates a change in inducedexpenditure. The induced changes are at the heartof the multiplier effect.Induced expenditure is the sum of the componentsof aggregate expenditure that change withGDP.♦ Autonomous expenditure is the sum of the componentsof aggregate expenditure that do notchange when real GDP changes.
