GDP

Question 1

What is GDP?

Answer 1

Total market value of all goods and services produced IN A COUNTRY in a given year

Question 2

What is the difference between GDP and GNP?

Answer 2

GNP is based on citizenship–goods can be made outside of country and still be counted as U.S. GNP

Question 3

What are the things included in GDP?

Answer 3

Personal Consumption Expenditure (C), Investment (I/Ig), Government spending (G), and Net Exports

Question 4

What are the percentages for things included in GDP?

Answer 4

C = 66%, Ig = 18%, G = 20%, Xn = 0%

Question 5

What is Personal Consumption Expenditure (C)?

Answer 5

Spending by households on Goods and Services

Question 6

What is Investment (I/Ig)?

Answer 6

Purchase of goods that will be used to make more goods

Capital goods - physical capital: tools, factories, new houses/construction

Question 7

What are the subcategories for PCE and Ig? What do they include?

Answer 7

A. Business Fixed Investment - tools, machinery

B. Residential Fixed Investment - Construction of residential

Question 8

What is not counted in GDP?

Answer 8

I. Intermediate goods - purchased for resale or part of a product
II. Transfer payments - 2 or more people transfer money without contributing to production
A. Public transfer payments - SS, Welfare
B. Private transfer payments - Transfer of $, stock, cash gifts AKA
III. Purely financial transactions - stocks, bonds, CDs
IV. Secondhand goods - used goods
V. Secondhand sales - not currently produced
VI. Anything you do for yourself - clean house, etc.
VII. Black market items - illicit goods and services