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GDP

GDP. Gross Domestic Product. Economics, Unit: 06 Lesson: 01. Learning Targets. Define GDP Explain How Gross Domestic Product is calculated Explain the difference between nominal GDP and real GDP Explain difference between GNP & GDP. Gross Domestic Product.

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GDP

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  1. GDP Gross Domestic Product Economics, Unit: 06 Lesson: 01

  2. Learning Targets • Define GDP • Explain How Gross Domestic Product is calculated • Explain the difference between nominal GDP and real GDP • Explain difference between GNP & GDP

  3. Gross Domestic Product Dollar value of all final goods and services produced within a nation’s borders in one year.

  4. Economic growth is one of the major goals of U.S. • Economic growth - increasing production of goods and services • To do this, we must use our productive resources wisely and efficiently.

  5. How to useFactors of Production Wisely • Land or natural resources – don’t waste, but conserve • Labor or human resources – make sure workforce has adequate training & education • Capital goods/resources – save more and invest more in capital goods • Entrepreneurship – new business vital, encourage entrepreneurs to start new business

  6. GDP measureseconomic growth

  7. How is GDP determined? -GDP combines spending of the 3 sectors within the national economy including households (consumer spending), business firms (investment), and the government(government spending)-GDP also calculates international trade (exports and imports) as a contributing factor

  8. C + I + G + (X-M) = GDP

  9. C+ I + G + (X-M) = GDP C = consumer spending

  10. C + I+ G + (X-M) = GDP I = investment (business) spending on capital goods

  11. C + I + G+ (X-M) = GDP G = government spending

  12. C + I + G + (X-M)= GDP (X-M) = net exportX= exportsM= imports(exports – imports)

  13. C + I + G + (X-M) = GDP • C = consumer spending • I = investment (business) spending • G = government spending • (X-M) = net export (exports - imports)

  14. GDP Foreign = Net Export If below zero, it means there are more imports than exports

  15. Not included in GDP: Intermediate goods: Goods used in the production of another good (We wait and count the final product).

  16. Cost of denim fabric not counted Instead, we count the value of the finished product, jeans.

  17. not counted not counted New Goodyear Tires New Stereo NEW TRUCK or final product counted in GDP

  18. Used products -These products were counted the year they were made so we will not count them again this year or the year it was purchased. For example, if you buy a used car, just 1 year old with only 10,000 miles, it is not counted in this year.

  19. Non market activities • These are activities that a person does themselves such as painting your house instead of hiring a painter. You do not have a buyer and a seller so you do not have a market.

  20. Illegal market • This includes all of the underground economy or illegal transactions. Such as: • gambling • drugs • stolen property

  21. Financial Transactions • This includes things like stocks and bonds. Nothing is produced; just paper showing a claim of some sort, not a good or service.

  22. Gifts or Transfer • You receive money for your birthday, or pay taxes or pay child support. Nothing is produced; simply transferring money from one group to another

  23. Different Types of GDP • Nominal GDP: no adjustment for inflation (current dollar value used) • Real GDP: adjusted for inflation (converted to base year prices) • Real per Capita GDP:Real GDP Population • shows overall standard of living

  24. GDP & GNP • GNP – Gross National Product: all goods & services produced by a nation’s citizens inside and outside of borders. • GDP – Gross Domestic Product: all final goods & services produced within a nation’s border during a year

  25. Limitations of GDP • Non-market activities • The underground economy • Negative externalities • Quality of life • http://www.learner.org/vod/vod_window.html?pid=2467

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