The ‘economic growth’ referred to in the news is real economic growth – that is, growth with the effects of price rises removed. In this article, we will be referring to the real national income and real economic growth.
GDP represents the economy’s national income. It is measured over time and the value of GDP can be calculated using three different approaches: 1 Output method measures total valued added through production within an economy. The term ‘value added’ is used to avoid the problem of ‘double counting’ the output of certain industries (e.g. when output is used as an input into the production of another product). 2 Income method measures total income generated from activity. This includes income from the economy’s factors of production, income from employment, profits earned by companies, rental income, as well as the interest earned from investments.
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