Using the national output for calculating national income, Managerial Economics

Using the National Output for Calculating National Income

A final method which is more direct is the "output method" or the value added approach.  This involves adding up the total contributions made by the various sectors of the economy.  "Value Added" is the value added by each industry to the raw materials or processed products that it has bought from other industries before passing on the product to the next stage in the production process.  This approach therefore centres on final products.  Final products will include capital goods as well as consumer goods since while intermediate goods are used up during the period in producing other goods, capital goods are not used up (apart from "wear and tear" or depreciation) during the period and may be thought of as consumer goods "stored up" for future periods. 

Final output will include "subsistence output", which is simply the output produced and consumed by households themselves.  Because subsistence output is not sold in the market, some assumption has to be made to value them at some price.  We also take into account the final output of government, which provides services such as education, medical care and general administrative services.  However, since state education and other governmental services are not sold on the market we shall not have market prices at which to value them.  The only obvious means of doing this is to value public services at what it costs the government to supply them, that is, by the wages bill spent on teachers, doctors, and the like.  When calculating the GDP in this matter it is necessary to avoid double counting.

Posted Date: 11/28/2012 5:56:20 AM | Location : United States







Related Discussions:- Using the national output for calculating national income, Assignment Help, Ask Question on Using the national output for calculating national income, Get Answer, Expert's Help, Using the national output for calculating national income Discussions

Write discussion on Using the national output for calculating national income
Your posts are moderated
Related Questions
classification of costs

factorsw determining demand

The International Monetary Fund The International Monetary Fund is a kind of an embryo World Central Bank.  Its objectives are: i.    To work towards the full convertibilit

Q. Show the Fixed Proportion Production Function? A fixed proportion production function is one in that technology needs a fixed combination of inputs, say labour and capital,

Explain the theory of production, Managerial Economics Explain the Theory of Production

Fall in Supply When the supply falls, the supply curve shifts to the left to position S 1 S 1 .  At the initial equilibrium price P 1 , quantity supplied falls from q 1

Merits of direct taxes a.  They satisfy the principle of equity as they are easily matched to the tax payers capacity to pay once assessed. b.  They satisfy the principles

Environmental issues of Managerial economics Managerial economics also includes some aspects of macroeconomics. These relate to political and social environment in that anin

The Central Bank These are usually owned and operated by governments and their functions are: i.      Government's banker :  Government's need to hold their funds in an ac