Topic 2: Circular Flow And Quantitative Elements: Economic Goods And Services Flashcards
What does production process?
Almost all the things that we use, whether they are goods and services become available
What are national accounts
Keep record of these goods and services and their total aggregate values
Also present the production, income and expenditure of our country
Published in the SARB QB Quarterly Bulletin according to the system of national accounts (SNA) of the UN
What does Final consumption expenditure refer to?
Refers to the total spending of households and private non-profit institutions on new final goods and services for example a sporting club
The goods and services households produce for their own consumption are also included like imputed rent, domestic services and agricultural produce
Classification according to the nature of goods and services
Durable goods have an expected lifespan of more than one year
Semi durable goods last approximately one year, after which they must be replaces
Non-durable goods are consumed or destroyed in the process of being used
Services last only for the time they are used or enjoyed
Purpose of expenditure
It shows the relative importance of subgroups of consumption expenditure these subgroups are used to compile the consumer price index and to calculate a purchasing power parity foreign exchange rate
Consumption expenditure by general government and classification consists of what?
Consumption expenditure by general government consists of wages and salaries of employees, purchase of non capital goods and services and the imputed value of capital consumptions
It can be classified to the nature and according to the purpose of the expenditure
Consumption expenditure by general government equals
Plus compensation of employees
Plus consumption of fixed capital
Less sales of government services
Consists of purchases of goods and non Labour services
The goods and services that government provides to consumers do not have market values
What is included in the GDP
Expenditure on food, clothing, desks, oil, gas are all directly included in the GDP
Ranked as intermediate good
Classification according to the nature of expenditure
Compensation of government employees is the payment paid to government employees which consist of salaries and wages
Consumption of fixed capital, which is an imputed amount, is added to government consumption expenditure which includes government buildings,roads and structure
Sales of government services are those transactions in good and services as provided by general government bodies where there is a clear link between the payment for and the acquisition of the goods or services concerned
Characteristics of individual consumptions
- it must be possible to observe the acquisition of the goods and services by an individual household or member of it
- The household must have agreed with the government to the provision of the good and service and must do whatever is necessary to make it possible
- Acquisition of the goods or service by one person, household or small group precludes use by others for example hospital care or sports facilities
Characteristics of collective consumption
- These services can be delivered at the same time to every member of the community
- The use of such services is usually passive and does not require the explicit agreement or participation
- The provision of the service to one person or household does not reduce the amount available to others in the same community
Importance of Consumer expenditure
- Consumption expenditure by general government in SA accounts for 27% of the total consumption expenditure of the country
- Business make no direct contribution to consumption expenditure
- Goods and services are expenditure on intermediate goods and is excluded from the GDP
Gross fixed capital formation
Represents expenditure on tangible or intangible assets which have been produced and are themselves and are used repeatedly in process of production for more than a year
Tangible and intangible assets
Are buildings, construction, machinery, tools, equipment in inventories
Intangible acquisitions cover such items as the cost of mineral exploration, computer software and original works of literature and art.
Classification of gross fixed capital
What is included in gross fixed capital
- Economic activity
- Assets
- Organisation like private sector
