Economy's output

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This measurement does not give a complex picture of the welfare of a nation but is an important record of a country's economic success and provides a useful perspective on the way the economy works. It shows how factor markets relate to product markets, how output relates to income and how consumer spending and business investment relate to production. It also shows how the flow of taxes and government spending may alter economic outcomes.
There are two ways to measure the performance of an economy:
- measuring the National Product;

- measuring the National Income, (figure 2.1.).
The unit of measurement is money in form of a payment flow. In the top loop of figure 2.1. we see the payments for the goods and services produced. The top loop measures national product. In the bottom loop, we see where the receipts of businesses go to: to pay wages, salaries, rents, interests and profits. The bottom loop measures the national income.
Figure 2.1. shows that consumers buy directly all the final goods produced by an economy, in exchange of payment, but we shall see later that the world is much more complicated than that.

To facilitate the accounting procedures of the GNP we need some mechanism for organizing annual output data into a more manageable summary. The mechanism we use is prices. Each good or service produced and brought to market has a price. That price serves as a measure of value for computing total output. If we consider the problem of determining how much output was produced during one year, there is no obvious way to answer this question in physical terms. But once we know the price of each good, we can compute the value of output produced in a given time period.

When computing the national product (total output of an economy), there is, however, one danger: all products go through a number of stages in the process of production and, therefore, they are sold several times. That is why it is important to compute only once what has been produced. For this purpose we distinguish between: « mai multe referate din Economie