DEBASISH BISWASCourse Instructor

Course: Macro Economics Section: K

AIUB Where Leader are Created

Islam Shah Syful 09-13027-1Sozib Md. Habibur Rhaman 08-12419-3Alam Md. Toushikul 09-12855-1Haque Mohammad Ashikul 09-13015-1Uddin Syed Sarwer 09-13010-1

PREPERED BY

The gross domestic product (GDP) is a basic measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year

MEASURING GROSS DOMESTIC PRODUCT

There are three approaches to measure gross domestic product (GDP)

Two sector models Three sector model Four sector model

Two sector models Two sectors model known as classic model In two sector model house hold input money

to the farm by expenditure and farm give money to the household by wages, Interest, Rent, and Profit

Y = C

A person gets 3000tk wages, 5000tk interest, 500rent from a business farm. On the other hand, the business farm gates 8500tk by his expenses.

Spending

Goods andservicesbought

Revenue

Goodsand servicessold

Labor, land,and capital

Income

= Flow of inputs and outputs

= Flow of dollars

Factors ofproduction

Wages, rent,and profit

FIRMS•Produce and sellgoods and services

•Hire and use factorsof production

•Buy and consumegoods and services

•Own and sell factorsof production

HOUSEHOLDS

•Households sell•Firms buy

MARKETSFOR

FACTORS OF PRODUCTION

•Firms sell•Households buy

MARKETSFOR

GOODS AND SERVICES

Copyright © 2004 South-Western

Two sector models Diagram

On other diagram we see that saving go in to capital market and it’s tarn in to in vestment.

Y = C + S Y = C + I

S = I

A person gates 8000tk wages, 15000tk interest, 1000rent from a business farm. On the other hand the business farm gates 15000tk by his expenses and 9000tk by investment

Y = C + I

Spending

Goods andservicesbought

Revenue

Goodsand servicessold

Labor, land,and capital

Income

= Flow of inputs and outputs

= Flow of dollars

Factors ofproduction

Wages, rent,and profit

FIRMS•Produce and sellgoods and services

•Hire and use factorsof production

•Buy and consumegoods and services

•Own and sell factorsof production

HOUSEHOLDS

•Households sell•Firms buy

MARKETSFOR

FACTORS OF PRODUCTION

•Firms sell•Households buy

MARKETSFOR

GOODS AND SERVICES

Copyright © 2004 South-Western

Investment

Capital Market

Saving

Three sector model

This model is like two sector model hear it include government. Hear govern takes direct & indirect taxes from people & business firm and expense where needed

Y = C + I + G

A person gates 8000tk wages, 15000tk interest, 1000rent from a business farm. And give tax 3600. On the other hand the business farm gates 13200tk by his expenses and 7200tk by investment and government invest 3600tk.

fig

Factorpayments

Factorpayments

Consumption ofdomestically

produced goodsand services (Cd)

Consumption ofdomestically

produced goodsand services (Cd)

Investment (I)Investment (I)

Governmentexpenditure (G)

Governmentexpenditure (G)

BANKS, etc

Netsaving (S)

Netsaving (S)

GOV.

Nettaxes (T)

Nettaxes (T)

Four sector model

Four sector models like three sector model except it has included foregone exchange here government and business farm import goods, services and man power and export goods, services and man power. The balance of import & export business is called XN

Y = C + S + G + Xn

Xn = the balance of foreign trade ( Export – Import )

fig

Factorpayments

Factorpayments

Consumption ofdomestically

produced goodsand services (Cd)

Consumption ofdomestically

produced goodsand services (Cd)

Investment (I)Investment (I)

Governmentexpenditure (G)

Governmentexpenditure (G)

Exportexpenditure (X)

Exportexpenditure (X)

BANKS, etc

Netsaving (S)

Netsaving (S)

GOV.

Nettaxes (T)

Nettaxes (T)

XN

Importexpenditure (M)

Importexpenditure (M)