Aggergate supply and gdp

Discussion in 'CT7' started by divyam sankharva, Apr 5, 2015.

  1. divyam sankharva

    divyam sankharva Member

    Looking at the definetion of aggegrate supply and gdp they both look same , so are they actually same or is there any difference?
     
    divyam sankharva, Apr 5, 2015
    #1
  2. Gresham Arnold

    Gresham Arnold ActEd Tutor Staff Member

    Hi Divyam

    What definitions of Aggregate Supply and GDP are you referring to?

    Do you mean the definitions of aggregate demand and GDP calculated by the expenditure method (C+I+G+X-M)?

    Best wishes

    Gresham
     
    Last edited: Apr 6, 2015
    Gresham Arnold, Apr 6, 2015
    #2
  3. divyam sankharva

    divyam sankharva Member

    1. Yaa i am facing problem between aggegrate demand and gdp also since the formula for both is C I G X-M, is it that because we consider the economy in a state of equilibrium?

    2. And i read the definetion of aggegrate supply in other book it stated"aggegrate supply refers to total goods and services produced and supplied by all producers and sellers in a country during the given time period " , the difference just seem to be with the word supply , so is aggegrate supply equal to total amount of goods supply out of gdp/ total out put?
     
    Last edited by a moderator: Apr 7, 2015
    divyam sankharva, Apr 7, 2015
    #3
  4. Gresham Arnold

    Gresham Arnold ActEd Tutor Staff Member

    Hi Divyam

    The broad formula for calculating GDP via the expenditure method is the same as that for calculating Aggregate Demand (C + I + G + X - M). However, the Investment item (I) is calculated differently.

    If a firm produces some goods, but they are not sold and so are added to their stock then, when calculating GDP, these goods are considered to be an investment and so are included in I.

    When we calculate Aggregate Demand these unplanned changes to stock are not included in I.

    So, as I is calculated differently, Aggregate Demand does not have to equal GDP.

    You are right that Aggregate Supply is the total amount of output in the economy.

    Hope that helps?

    Gresham
     
    Last edited: Apr 7, 2015
    Gresham Arnold, Apr 7, 2015
    #4
  5. divyam sankharva

    divyam sankharva Member

    Thank you
     
    divyam sankharva, Apr 8, 2015
    #5

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