2 Flashcards
A method of inquiry from identifying a problem, proposing alternative tentative answers or
hypotheses
SCIENTIFIC Method
When speaking about economic hypothesis they way you phrase your statement is actually
a pretty big deal.
POSITIVE ECONOMICS VERSUS NORMATIVE ECONOMICS
deals with what is currently happening like unemployment rate, inflation rate and cut in income tax
improving the incentives to find jobs.
Positive economics
Refers to “what ought to be” or “what should be”. “It conveys values, opinions and judgments
about the effects brought by economic practices if there are modifications in the public policies”.
Normative Economics
We always get to watch in the television, read some articles in the internet or have heard in the radio that our country has grown or performed well.
MEASURING THE ECONOMY
calculates the output of a country’s residents wherever the location of the actual underlying
business’ activity.
GROSS NATIONAL PRODUCT (GNP
Formula of GNP
GNP= C + I + G + (X – M)
What is C + I + G + (X – M)
C- “Household and Individual Consumption”
I- Investments
G- “Government Expenditure on goods and services including labor”
X- “Exports”
M- “Imports, it is excluded because import products are produced in other economies.”
is the aggregate monetary or market value of all the final goods and services created within a nation’s borderline in a certain period.
GROSS DOMESTIC PRODUCT (GDP)
The expenditure approach is one of the approaches for quantifying gross domestic product (GDP) that sums up consumption of every households, investment of firms for properties and machineries used for production
GNP/GDP: EXPENDITURE APPROACH vs. INCOME APPROACH
As we have mentioned the only main difference between income and expenditure approach is their starting point. GDP using “income approach” quantifies the total earnings received by a certain nation’s household in specific period.
GNP/GDP: INCOME APPROACH
This is identified as the earnings that people obtain for providing factors of production namely:
land, labor, capital or entrepreneurship.
FACTOR PAYMENTS
refers to the payment household received for land is rental income.
Land: Rent
refers to the payment household received in exchange for their labor whether manual labor or
intellectual labor.
Labor: Wages
refers to the payment household received for depositing to a financial institution their savings for a
specific span of time.
Capital: Interest
refers to the payment household received for operating its business.
Entrepreneurship: Profit
The expenditure method is the most utilized system for calculating GDP, which is an indication of the economy’s goods and services created inside a country regardless of who employs the methods to produce and regardless of the location of production.
GNP/GDP: EXPENDITURE APPROACH
GDP formula
GDP= C + I + G + (X – M)
When consumers buy goods and services this is known to be consumption.
HOUSEHOLDS
When the firm spends money on capital goods, it refers to the property, equipment and technology used to produce goods and services this, we called investment.
FIRMS
When the government spends money that provides public goods and safety like, infrastructure bridges and highways, education building of public schools and healthcare to the households and firms it is simply called government spending.
GOVERNMENT
Money spent by foreigners on our country’s goods and services. Foreigners earn their income in their own country’s resource market but they choose to spent some of those income in our country’s goods and services
FOREIGNERS
FACTOR PAYMENTS
Land: Rent
Labor: Wages
Capital: Interest
Entrepreneurship: Profit
