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GDP/GNP

GDP/GNP. Measuring the Economy. Two Measurements. GDP. GNP. Gross Domestic Product Dollar value of all G/S produced within a countries borders in a given year. Foreign producers in US? US companies oversees?. Gross National Product

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GDP/GNP

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  1. GDP/GNP Measuring the Economy

  2. Two Measurements GDP GNP • Gross Domestic Product • Dollar value of all G/S produced within a countries borders in a given year. • Foreign producers in US? • US companies oversees? • Gross National Product • Dollar value of all G/S produced by citizens of a country during a given year. • Foreign producers in the US? • US companies oversees?

  3. Two Calculations Sales Salaries • Add together the receipts for all recorded transactions • Black market • Barter • Inflation • Variety • Add together the salaries of all income earned • Under the table • Efficiency • Double counting • Distribution

  4. What GDP does NOT tell us! • Non-market Activities • Some people do activities for themselves that others pay for • Oil changes/lawn care • Quality of Life • Production might be predicated on over-worked employees • Medical internists • Distribution of Wealth • There may be a few uber-rich people and many incredibly poor • Loss of US middle class • Inflation • Values may rise without increasing production • 2 Turtle Doves/automobiles

  5. More on the limitations of GDP • Underground Activity • Illegal activities do not get recorded by governments • Drug sale/prostitution • Per Capita Income • Some countries have huge populations while others do not • US average is just under $50,000 • Variety of Goods • Economies can be narrowly focused • Oil production • Negative Externality • Production can result in pollution • Cuyahoga River fire

  6. Question B: Is GDP/GNP a good measure of an economy? How does knowing the statistic’s shortcomings help in evaluating an economy? Give an example of a country who’s GDP/GNP does not accurately measure the economy. State the limitation from the chart in your notes.

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