Topic 1 - Measurement Flashcards
Definition of GDP
Gross Domestic Product: The market value of all final goods and services produced within a country over some period of time
Three approaches to calculate GDP
1: Production
2: Expenditure
3: Income
Calculation of GDP through production
Summation of all firms’ value added
Value added = Sales revenue - cost of intermediate goods
Calculation of GDP through expenditure
Summation of all purchases of goods and services
C + I + G + X - M
Consumption, Investment, Government Expenditure, Exports, Imports
(only final goods for C, I, G)
Calculation of GDP through income
Summation of payments (or income) received by labor, capital, and taxes
National Income Accounting Identity
GDP = total expenditure of domestic economic agents (C+I+G) + expenditure of foreign agents on exports (X) - domestic expenditure that was imported (M)
The difference between Gross Domestic Product and Gross National Product
GDP is the production in the US regardless of whose labor and capital is used while GNP is the production of domestically owned labor and capital in the US and abroad.
Nominal GDP
Total value of production using current market prices to determine the value of each unit that is produced.
Real GDP
Total value of production using market prices from a specific base year to determine the value of each unit that is produced.
GDP Deflator
Consumer Price Index (CPI)
Inflation Rate
Growth Rate
What is not measured by GDP? (6 terms)
- Depreciation
- Home Production
- Underground Economy
- Negative Externalities
- Leisure
- US workers abroad
