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A look at using the output/input method for coming up with budget figures


The output/input method is one of the key ways that large corporations and the government come up with budget figures.For example, in order to determine the value of goods and services that are produced in a nation's economy, measures of national input and output are used to estimate those values of goods and services within an economy.

The way that the national government calculates the output and input of the national economy and comes up with budget figures for the national economy can use a number of different methods: the expenditure method, which determines what the aggregate demand is by adding up consumption, investment, net exports, and expenditures; the income approach and the output approach which both add up the wages, the rents, the interest, the profits, and the non-income charges, along with the net foreign factor income that is earned.You have to ensure that all three methods will come up with the same budget figures because your expenditures on all goods and services must equal the value of goods and services that you produce, which must also equal the total income that is paid to those who produce the goods and services that are being exported.


However, there will always be some minor differences when using the output method and the input method when you are coming up with budget figures due to changes in inventory levels.Why?Because goods in inventory have been produced, and thus you are including them in what is being produced, but those goods have not yet been sold, so they haven't been included in what has been sold.Also, due to other similar timing issues, you might end up having other small discrepancies between the value of all of your goods and services that are produced and how much is paid to those who produce the goods and the services-in other words, your employees-particularly if any inputs are purchased on credit instead of with cash.

So how does input and output end up working when a nation is coming up with its overall figures?Well, the gross national product is the total value of all of the final goods and services that a country produces and then sells on the market during a particular period of time.The nominal gnp will measure the value of the output of a country during a particular period of time using the prices that are current during that period of time.However, it is important to remember that the prices of your output may rise because of common inflation.This may lead to an increase in your nominal gnp even if you don't produce any more goods and services during that period of time.

The real gnp will measure the value of output over different years by adjusting the value of the goods and services that are produced.Then, the gross domestic product will be the total value of final goods and services that are produced during a particular period of time-such as a year.

Coming up with a budget for your company is vital so that you can track where your money is going and how much money is coming in.If you don't have accurate figures, and if you aren't tracking both your input and your ouput, then you won't be able to tell whether or not your company is financially viable.Only by tracking outgoing products and services and expenditures and incoming money and supplies will you be able to accurately tell whether or not you can continue to afford functioning as a company and whether or not you need to trim certain areas within your company.Coming up with a firm input/output budget can also help you determine whether or not you have enough capital and assets to expand your company or your corporation.

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