Week 1 - GDP Flashcards
Gross Domestic Product (GDP)
the total income of everyone in the economy/the total expenditure of goods/services
Components of GDP
Y = C + I + G + NX
Y = GDP
C = Consumption
I = Investment
G = Government spending
NX = Net exports
Consumption
Spending by households on goods/services.
Whats an exception in consumption?
Purchasing of new housing
Investment
Goods used to increase future GDP. Spending on capital equipment, inventories, and structures (inventory accumulation).
Government spending
Spending by the public sector on goods and services such as education, health care and defence.
Net exports
the value of a country’s total exports minus the value of its total imports.
Exports
Spending on domestically produced goods by foreigners
Imports
Spending on foreign goods by domestic residents
What is the current account the sum of?
- The balance of trade (NX)
- Net factor income (interest/dividends)
- Net transfer payments (foreign aid)
Numerical components of GDP (UK)
- Consumption = 64%
- Investment = 15%
- Government spending = 23%
- Net exports = -2.5%
Gross National Product (GNP)
the value of all finished goods and services produced by a country’s citizens, both domestically and abroad.
Whats the difference between GDP and GNP?
GNP excludes the incomes that foreigners earn in the UK
GNP formula
GNP = GDP + Net factor income from abroad
Nominal GDP
the total market value of all goods and services produced in a country’s economy over a given period, this is not adjusted to account for price changes from inflation/deflation
