Ch. 6 GDP & the measurement of progress Flashcards
Definition of Gross Domestic Product (GDP)
the market value of all final goods and services produced within a country
What is GDP per capita?
GDP divided by a country’s population
What is included in GDP?
Only final goods:
ex. Services of realtors because their services represent current economic activity, and production taking place within the borders of a country.
Goods are ________, while services are ____________
tangible; intangible
What is Gross National Product? (GNP)
Value of goods and services produced by US residents no matter where they live
What does GDP measure?
It measures the rate of production during a given time period
What are nominal variables?
they have not been adjusted for changes in prices
What are real variables?
they have been adjusted for change in prices
What does Real GDP reflect
Increases in the standard of living
Which GDP is preffered by economists?
Real GDP
Who usually report nominal GDP?
Media
What is the equation for GDP Growth?
(GDPx-GDPy)/(GDPy)x100=GDP growth rate for year x
What are the common ways of splitting GDP?
National spending approach and factor income approach
Why split GDP?
Both ways throw a diff. light on the economy. The different components of spending behave different over time.
What are some problems with GDP?
- Many goods and services for which we do not know the market value
- Doesn’t add value of leisure
- Growth in GDP per capita does not mean everyones
- Income grows @ the same rate
