1 / 6

Gross Domestic Product (GDP)‏

Gross Domestic Product (GDP)‏. Definition: market value of all final goods and services produced in a country in a given year market value: excludes goods/services not sold for money final goods: excludes intermediate goods (goods used to make final goods)‏ in a country:

nell-morse
Download Presentation

Gross Domestic Product (GDP)‏

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Gross Domestic Product(GDP)‏ • Definition: market value of all final goods and services produced in a country in a given year • market value: excludes goods/services not sold for money • final goods: excludes intermediate goods (goods used to make final goods)‏ • in a country: • Includes production by foreign firms • Excludes overseas production by domestic firms • in a given year

  2. Components of GDP • Y = C + I + G + NX • Y = total GDP • C = consumption • I = investment • business investment • residential housing • G = government purchases • excludes transfer payments (Social Security etc.)‏ • NX = net exports = X – M • X = exports • M = imports • Net exports often ignored in beginning classes (“closed economy”)‏

  3. Problems with GDP • Generally acknowledged • Excludes production not compensated with money (child care, home improvements, etc.)‏ • Excludes production of illegal goods • Excludes intermediate goods • Not widely acknowledged • Difficult to deal with new and better products • Includes government purchases which are coercively financed • An excuse for politicians to try to manage economic behavior

  4. Rate of GDP growth • Economists are more concerned with the rate of change of GDP than with its absolute level. • Rates of change are expressed as annualized percentage • Annualized: multiply one quarter’s change by 4 • Convert to percent • Recent U.S. GDP figures • Q1, 2011: 0.4% • Q2, 2011: 1.3% • Q3, 2011: 2.5% (preliminary)‏ • Typical economic recover has much higher rates

  5. Correction for inflation • Comparing GDP figures from different years is subject to distortion due to changing (usually declining) purchasing power of money. • Solution: divide by an appropriate price index to get “real GDP”

  6. Comparison of GDP between countries • Convert to common currency • Divide by population to get per capita GDP

More Related