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Economics For Managers - Session 16

Economics For Managers - Session 16

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Published by Abimanyu NN
ECONOMICS FOR MANAGERS
ECONOMICS FOR MANAGERS

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Categories:Types, Business/Law
Published by: Abimanyu NN on Oct 18, 2011
Copyright:Attribution Non-commercial

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08/16/2014

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PSG INSTITUTE OF MANAGEMENT
MBA 2011-13 BATCHI Trimester
Session XVI- For Batch C and DBusiness Decisions and Government(Contd.)
10th Oct 2011EFM Faculty P.Uday Shankar1
ECONOMICS FOR MANAGERS
 
National Income Accounting- the ThreeApproaches
1)
THE EXPENDITURE APPROACH: The economicwealth created in a period can be measured by theamount of expenditure on goods and services thatare produced by the nations economy.a) Expenditure is incurred by consumers,government and foreign buyers of our exports.Expenditure on IMPORTS represent wealth createdby other countries, and so the value of expenditureon imports must be DEDUCTED from the totalexpenditure.b) Expenditure by FIRMS are EXCLUDED to avoiddouble counting. If we include expenditure by firmswe would be double counting the value of wealthcreated by the suppliers of raw materials and otherservices to firms.
 
National Income Accounting- the Three Approaches
 
B)
THE INCOME APPROACH: This approach measures theincome of the individuals from employment and from self-employment, the profits of firms and public sectorenterprises and rent on property. ( Interest earnings willbe included within the profits of companies or the incomeof individuals.)C) THE VALUE ADDED or OUTPUT APPROACH: Thisapproach is to measure the value added by all activitieswhich produce goods and services, that is their netoutput in the period.NOTE:
All the three approaches will in theory result in the same total amount of economic wealth created in the period which is called NATIONAL INCOME.

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