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Measuring GDP

Measuring GDP. The National and International Economy. Aims . To identify methods of measuring economic growth. Problems with measuring economic growth Explain how economic growth could be sustained. Objectives . All students to be able to identify how economic growth is measured.

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Measuring GDP

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  1. Measuring GDP The National and International Economy

  2. Aims • To identify methods of measuring economic growth. • Problems with measuring economic growth • Explain how economic growth could be sustained.

  3. Objectives • All students to be able to identify how economic growth is measured. • Most students to be able to identify the problems with measuring economic growth. • A few students to discuss the implications of the hidden economy.

  4. Further Reading Pages 108 - 110 Online • http://www.tutor2u.net/economics/revision-notes/as-macro-economic-growth.html

  5. Gross Domestic Product • Definition: the total output of goods and services produced in a country. • GDP is the most important of all economic statistics as it attempts to capture the state of the economy in one number.

  6. Real or Nominal GDP • Nominal GDP refers to GDP at current prices, and has not been adjusted for inflation. • Real GDP has been adjusted for inflation to represent the real value of goods and services.

  7. Measuring GDP • GDP can be measures in three ways: • Output measure • Expenditure measure • Income measure

  8. Output Measure • This is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and the government.

  9. Expenditure Measure • This is the value of goods and services purchased by households and government, investment in machinery and building. • It also includes the value of exports minus imports.

  10. Income Measure • The value of the income generated mostly in terms of profits and wages. • Transfer payments - transfers of income from one group to another not providing a good or service – must not be included.

  11. How is GDP calculated? • Calculating a GDP estimate for all three measures is a huge undertaking every three months. • The output measure alone – which is considered the most accurate in the short term – involves surveying tens of thousands of UK firms.

  12. How is GDP calculated?

  13. Problems of measuring GDP • Two main problems arise in seeking to gain an accurate measure of the output of a country. • How to calculate the size of the hidden economy. • How to calculate the value of non-marketed goods and services.

  14. Hidden Economy • The hidden economy is also known as the black or shadow economy. • People may want to avoid paying tax. • Illegal activity

  15. Non Marketed goods and services • GDP figures only include goods and services that have a price attached to them. • They do not include items which are not bought and sold, such as DIY activities, voluntary work, childminding etc.

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