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Gross Domestic Product GDP

Learn about Gross Domestic Product (GDP) and Consumer Price Index (CPI) as key indicators for measuring a country's well-being and inflation. Discover the limitations of GDP and how to calculate economic growth rate using real GDP and CPI.

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Gross Domestic Product GDP

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  1. Gross Domestic ProductGDP

  2. GDP • Gross Domestic Product • Dollar value of all goods and services produced within a country’s border in a given year • Measures a country’s well-being

  3. GDP Nominal GDP – GDP measured in current prices Real GDP – GDP expressed in constant unchanging prices -has been adjusted for inflation (general increase in prices)

  4. Consumer Price Index • CPI – helps measure inflation • Uses a market basket of typical goods/services for an urban household, to compare prices over time • Market basket includes food, rent, clothing, transportation, medical care, entertainment, tuition and more • If prices have gone up according to CPI then inflation has increased

  5. Limitations of GDP • Non-market activities – doesn’t measure services you perform for yourself (mowing the lawn, stay at home mom) 2. Underground activities – Black market - Informal transactions 3. Quality of life

  6. Formulas nominal GDP Real GDP = x 100 CPI Economic Growth Rate Real GDP Yr. 2 – Real GDP Yr. 1 x100 Real GDP Yr. 1

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