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Chapter 23 - Nation's Income
Chapter 23 - Nation's Income
Chapter 23 - Nation's Income
Pa Qa Pi Qi Ps Qs
10 10 12 10 08 10
Value addition
A farmer produces wheat which are
sold to a miller at Rs100.
Farmer’s Rs. 100
The miller processes the wheat into Miller’s Rs. 80
flour, which he then sells to a baker
for Rs.180.
Baker’s Rs. 70
Shopkeeper’s Rs. 50
The baker uses the flour to bake bread Total Rs. 300
which is then sold to shops for
Rs.250.
Any step in the production
The shopkeeper then sell the bread to process that improves the
final consumers for Rs.300. product for the customer
and results in a higher net
worth.
Calculate GDP in an economy, having two producers only…
Consumption (C )
Investment (I )
Government Purchases (G )
Net Exports (NX )
Y = C + I + G + NX
The Components of GDP
Consumption (C):
The spending by households on goods and
services, with the exception of purchases of
new housing.
Investment (I):
The spending on capital equipment,
inventories, and structures, including
new housing.
The Components of GDP
Nominal GDP
GDP deflator = 100
Real GDP
Converting Nominal GDP to Real
GDP