Chapter 13: GDP

1
Chapter 13 GDP

• Pgs 321-333

2
Gross Domestic Product

• Market value of all final goods and services
  produced in the economy over a year

3
Final versus Intermediate

• Final are goods either available to be purchased
  or purchased for final use.
• Ex. Pastries and bicycles
• Intermediate are goods purchased for resale or
  for use in making other goods.
• Ex. Flour and aluminum

4
Components of GDP

• Personal consumption expenditures
• Gross private domestic investment
• Government purchases of goods and services
• Net exports of goods and services

5
Price Index

• Measures the price level for a given period
  relative to the base period.
• Nominal GDP is the measurement of GDP using
  current prices.
• Real GDP is the measurement of GDP using constant
  prices.
• GDP deflator is a weighted average of the prices
  of all final goods and services produced in the
  economy.

6
Formulas

• Price IndexPrice for period in question/Price in
  base period(multiply all this by 100)
• Real GDP Nominal GDP/Price Index(in decimal
  form)
• Real GDPNominal GDP/GDP Inflator

7
Business Cycles

• Fluctuations in the level of economic activity
  that are recurring
• Four phases expansion, peak, contraction, and
  trough
• Expansion-real GDP has a rapid increase
• Peak-real GDP maxes out
• Contraction-real GDP decreases
• Trough-real GDP bottoms out at a low point

8
Real GDP

• 9/11 actually caused GDP to go up
• More money was spent on clean-up, rescue, etc
• People also demanded more security
• People we not made better off which GDP doesnt
  account for ones well-being.