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examples of intermediate goods and final goods and services

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Please address the questions below:

1. How is the total output of our economy measured?

2. Use the circular flow diagram to explain the co-relation between total output and total income.

3. Give examples of intermediate goods and final goods and services.

4. Explain in your own words the term transfer payment and give one example.

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Solution Summary

Total output in the economy is clearly explained.

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1. Total output in the economy is measured as either total income or total expenditure. In national income accounting, the identity Y = C + I + G + NX is used to describe this relationship. Y = GDP, C = Consumption, I = Investment, and NX = Net exports. Since C + I + G + NX equal total expenditures, and total expenditures equal total income, Y is equal to both total income and expenditures.

2. The ...

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