DQ #1. An Economy\'s Output Is Also

DQ #1. An economy's output is also its income because its output is calculated as the measurement of all the goods and services produced by the economy, and also being channeled back into the economy in the form of purchases in other economic sectors, savings, and investments. Expenditures measured in the form of GDP tally the production of goods and services on U.S. soil while GNP measures the production of goods and services produced anywhere by the U.S. residents. Both can generate income for U.S. companies and consumers that can be funneled back into the economy in exchange for other durable and nondurable goods, and services, as well as reinvested into other sectors. However, imported goods are subtracted out of the calculation of a national income, because the funds generated by the foreign production companies will be funneled back to the base, foreign nation. U.S. consumers may buy foreign goods, but the goods do not generate income for the nation as a whole.

DQ#2 National income accountants compare the market value of the total outputs over various years rather than calculate the physical volumes of goods in production because the market value takes into consideration the depreciation of the goods and the fact that not all goods produced by sellers are bought by consumers at a fair market value. Simply because there is a high volume of production does not mean that all goods are going to be purchased at a rate that recompenses the seller for the costs of production. Thus the problem posed by any comparison of market value vs. production volume is that of the seller gaining a fair market value, and also the fact that the longer stocks remain on the shelves, the lower their market value by and large, and the lower the price they are able to command. By taking depreciation into consideration when figuring market values of goods produced, national accountants are able to mitigate this inaccuracy of overvaluing mass production. Quality as well as quantity must always be taken into consideration when evaluating national income, and also overall economic health and circumstances.