3.2 Measuring the aggregate economy: gross domestic product

national accounts

the system used for measuring overall expenditure in a country

how is aggregate output calculated?

specifalized group of statisticians follow international guidlines and compile them in national accounts

what is the measure of aggregate output

gross domestic product (GDP)

3 ways of calculating GDP

correpond to measurements taken at 3 different points in the circular flow of macroeconomics
(1) output

(2) incomes
(3) spending

output

measured by the value added to each industry
= value of output - cost of input

incomes

sum of incomes paid to labor = wages, profits, incomes of self-employed, and taxes received by gov

expenditures

add up all money spent in home economy by its final users, including households, firms, gov, and residents of other countries

what would happen in accurate measurement were possible?

the total of expenditure, output, and incomes in a year would be the same so measurement pt wouldn’t matter

how can GDP be defined?

as aggregate income, aggregate output, or aggregate consumptipon