Re: isi

Posted by aditi5000 on May 11, 2012; 7:32am
URL: http://discussion-forum.276.s1.nabble.com/isi-tp7542957p7549506.html

yes exactly, gdp should exclude the value of stuff spent on foreign goods - in this case Rs.150

so gdp is simply -150. gdp is the value of current production - in this economy, not only has consumption not occurred but on top of that residents have spent money (which could have been spent domestically) on foreign goods so our gdp becomes -ve.

we can't add it and then subtract it and make gdp zero because then we are double counting.

this contrAsts with the case of selling of old stocks by firms in year 2. in this case, the stock becomes inventory in year 1 and then in year two its like they are disinvesting (at the time of sale) thats why it becomes -600... I hope this helps. Even i could be wrong but this is my understanding - based on the definition of gdp as current value of production... and of the segregation of the 4 sectors of the economy as hh, f, g and external ..

Refer to mankiw NI accounting - macroecon