U.S. Economic Growth Slows Amid Tariff Pressures: A 2025 Outlook

-
📉 U.S. Economic Growth Slows Amid Tariff Pressures: A 2025 Outlook As 2025 unfolds, the U.S. economy is showing signs of strain amid a global slowdown and heightened trade barriers. Here's a detailed look at the latest forecasts and implications based on insights from the OECD, Federal Reserve, and key market indicators . 📊 1. U.S. Growth Forecast Downgraded by OECD The Organisation for Economic Co-operation and Development (OECD) has revised the U.S. GDP growth forecast for 2025 to 1.6% , down from 2.8% in 2024 . The forecast for 2026 remains muted at 1.5% , reflecting persistent uncertainty driven by: Elevated trade barriers Reduced consumer spending power Sluggish business investment 💸 2. Tariffs Fueling Inflation & Trade Costs The average U.S. tariff rate has climbed to 15.4% , the highest level since 1938 . These tariffs have raised import costs, which are now being passed on to consumers: Projected consumer price inflation is expected to rise to...
Post a Comment

Demystifying National Income: Understanding Methods of Calculation

-

 National income serves as a vital measure of a country's economic performance, reflecting the total value of goods and services produced within its borders over a specified period. But how exactly is national income calculated? In this post, we'll unveil the methods used to measure national income and explore the intricacies of this essential economic indicator.

The Value Added Approach

One method of calculating national income is the value-added approach, also known as the product method. This approach measures national income by summing up the value added at each stage of production in the economy. Here's how it works:

  1. Calculating Gross Value Added (GVA): GVA represents the value of output produced by each sector of the economy, excluding the value of intermediate inputs. It is calculated by subtracting the value of intermediate consumption from total output in each sector.

  2. Summing Up GVA Across Sectors: Once GVA is calculated for each sector, it is aggregated across all sectors to obtain Gross Domestic Product (GDP) at market prices.

The value-added approach provides a comprehensive picture of economic activity by capturing the value contributed by each stage of production.

The Expenditure Approach

Another method of calculating national income is the expenditure approach, which measures GDP by summing up total spending on final goods and services within the economy. This approach is based on the identity:

���=�+�+�+(�−�)

GDP=C+I+G+(X−M)

Where:

  • �
  • �
  • �
  • �
  • �

By adding up these components, we obtain a measure of GDP that reflects total spending on domestically produced goods and services.

The Income Approach

The income approach to calculating national income focuses on measuring the total income earned by factors of production within the economy. This includes wages and salaries earned by labor, profits earned by entrepreneurs, rents earned by landowners, and interest earned by capital owners.

By summing up these various components of factor income, we arrive at Gross National Income (GNI). Adjustments are then made for taxes, subsidies, and depreciation to obtain Net National Income (NNI).

Conclusion

Each of these methods offers a unique perspective on national income, shedding light on different aspects of economic activity. By combining insights from these approaches, economists are able to construct a comprehensive understanding of a country's economic performance and dynamics. National income figures serve as essential inputs for policymaking, economic analysis, and international comparisons, making a thorough grasp of the methods of calculation indispensable for anyone seeking to understand the workings of the economy.

Comments

Post a Comment

Popular posts from this blog

The law of diminishing returns states

-
What is t he law of diminishing returns ? The law of diminishing returns states that as additional units of a variable input are added to fixed inputs, the marginal product of the variable input declines after a certain point. This observation was first made by the British economist David Ricardo in the context of agriculture in nineteenth-century England, where successive doses of labor and capital yielded smaller increases in crop output.  Diminishing returns also apply to manufacturing when a firm starts to exceed the capacity of its existing plant. Example of crop yield for  t he law of diminishing Let's say a farmer has a fixed amount of land, let's say one acre, and they want to grow corn. They start by planting 100 seeds, and with the help of a fixed amount of fertilizer and water, they get a yield of 100 bushels of corn. If the farmer decides to increase the number of seeds planted to 200, they might see a corresponding increase in yield to, say, 180 bushels. However, ...
Read more

Operation Sindoor: Unfolding Economic and Geopolitical Ripples

-
Operation Sindoor, launched by India as a strategic military response to a terror attack in Pahalgam, has sparked a wide array of economic and geopolitical consequences. Its impact has been felt not only in South Asia but has also rippled across regions such as Turkey, highlighting the interlinked nature of global politics and economics. 🇮🇳 India’s Calculated Economic Strategy Despite the heightened military action, the Indian government has maintained that Operation Sindoor will not adversely affect the national economy . According to BJP spokesperson Gopal Krishna Agarwal, India’s trade ties with Pakistan were already negligible , minimizing any fallout. The operation was carefully executed to ensure domestic financial stability remained intact , underlining India’s focus on strategic precision and economic foresight. 🇵🇰 Pakistan Faces the Heat Prime Minister Narendra Modi delivered a clear warning: Pakistan would face severe economic repercussions for backing terrorist ele...
Read more

Elastic and inelastic demand

-
  Elastic and inelastic demand are two concepts used in economics to describe the responsiveness of demand for a product or service to changes in its price. Elastic demand refers to a situation where the quantity demanded of a product or service changes significantly in response to a change in its price. In other words, when the price of the product or service goes up, the quantity demanded falls significantly, and when the price goes down, the quantity demanded increases significantly. Elastic demand is characterized by a relatively flat demand curve. Examples of products with elastic demand include luxury goods, vacations, and restaurant meals. Inelastic demand, on the other hand, refers to a situation where the quantity demanded of a product or service changes relatively little in response to a change in its price. In other words, when the price of the product or service goes up, the quantity demanded falls only slightly, and when the price goes down, the quantity demanded incre...
Read more