Help with macroeconomic

Economics
Tutor: None Selected Time limit: 1 Day

We know what GDP measures. List and discuss the benefits of using the expenditure approach to measuring GDP. What does it measure well, and what things are not measured by GDP but are still important in our lives?

Jul 22nd, 2015

Thank you for the opportunity to help you with your question!

 In this approach GDP is calculated as the sum of four categories of expenditures on output and this includes : net exports,government purchase,gross private investment and gross private consumption expenditure.

 Benefits

1.Allows government to get tax from labor-income exchange

2.Allows the government to involve its budget when determining GDP.

3.It is more accurate in areas with a wide range of income


This method is applicable in countries with a wide gap between rich and poor.

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 22nd, 2015
The expenditure approach to GDP can be useful for providing general information about economic conditions and studying changes in GDP over time. Analysts may use several methods and compare them to see how accurate they are and to learn more about where the weaknesses in various methods lie so they can compensate for them. Generally, analysts want to see steady, dependable growth, but they are alert to tricks to manipulate GDP, like numbers that rise a little too consistently to be true each year; a nation saying it is growing by 10% annually, for example, may not be calculating its GDP very accurately.

One advantage to the expenditure approach is the ability to see how people and governments spend their money. Consumption is usually the largest category, while exports tend to be the smallest. Shifts in investment and government spending can reveal changing market conditions and social attitudes.

Its flaws is that it does not count goods and services produced for personal use. There is no way, for example, to add child-rearing to any of the four categories.

Jul 22nd, 2015

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