The Economic Outlook Report announced the following macroeconomic Indicators for a certain economy in 2020 in comparison to 2019:
Rate of growth of Real GDP - 4% ( negative 4%)
Rate of inflation ( GDP deflator) 7%
Rate of unemployment % of labor force 12%
The Report stated that the business confidence was negatively affected in 2020 due to uncertainty & instability as a result of the Covid 19 Pandemic. The lockdown caused a great decrease in the exports of goods & services. Household demand shrank as many citizens lost their wealth, in addition to the impact of inflationary pressures. Economists advised the government to adopt policies to confront the unfavorable economic & social situation. They urged the Central Bank to decrease the interest rate. Moreover, "Ease of Doing Business Indicators" have to improve, accordingly they suggested lowering business taxes in case of spending on new capital goods that produce products in which the country holds a competitive advantage. Getting rid of bureaucratic paper work is a must to boost investment. They highlighted the importance of government health care spending to save lives. Also governmental expenditure on essential efficient infrastructure in the different districts is necessary. Funds to be provided to the IT ( Information & Technology ) sector as IT services are linked to the activities of many sectors. Government should provide cash transfers to people who were severely affected by the unsuitable economic status. Moreover government should provide subsidies to sectors that produce products that are used as an input in many other industries. Tax postponement to be provided to hotels & touristic sites as the previous long lockdown impacted their revenues.
Acknowledging that their proposal would increase the government budget deficit in the short run, they argued that their strategy focuses on ' sustainable development', 'net investment ', digitalization ' & ' green economy. in addition they aimed at increasing long run productivity through efficient training, research & development (R & D) spending & good governance. They focused on the role of productive entrepreneurs in different sectors. Boosting aggregate supply is of vital importance. " Green economy"
However, since 2022 ,after the Russian Ukrainian war, priorities, policies & macroeconomic tools changed all over the world.
Read the previous case then answer the questions:
a) Which approach did the Economic Outlook Report use to measure the real GDP in 2020 ? ( income or spending approach; just state WITHOUT any explanation).