system of national accounts

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9 Terms

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The SNA

The system is used to track economic output.

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SNA roles

Gives guidelines on the classification of 'accounts' that measure economic output .

Provide a Common Framework

Guide Policymakers and Analysts

Measure Economic Activity Consistently

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Why is GDP important?

  • Measure economic activity

  • Measure economic growth

  • Compare levels of wealth and development

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how to avoid double counting

  • only include the value added at each stage of production.

  • only include the final sale value of the good or service

  • only include the amount of income received at each production stage.

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The GDP deflator formula

GDP Deflator = nominal GDP / real GDP x 100

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The multiplier formulae

  1. K = ∆Y ÷ ∆J where ∆Y is the change in income and ∆J is the change in injections.

  2. K = 1 ÷ (1 - mpc), where the mpc is the marginal propensity to consume. 

  3. K = 1 ÷ mps, where the mps is the marginal propensity to save.

K = the multiplier

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Example: MPC = 0.8 → MPS = 0.2

K=1÷0.2=5

An injection of 100 → final GDP increase of 500.

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3 sector model

K = 1 ÷ (1 - mpc) = 1 ÷ (mps + mpt)