GDP

1
GDP

• Chapter 13

2
GDP

• Gross Domestic Product
• Dollar amount of all final goods and services
  produced within a countrys national borders in
  one year.

3
Why we need it

• GDP helps tell us how the economy is doing.
• If GDP is low, then the economy is not doing very
  well.
• If GDP is high, then the economy is good.

4
How we compute GDP

• Multiply all of the final goods and services
  produced in a 12-month period by their prices,
  and then add them up.

5
Exclusions

• Intermediate Products
• Secondhand Sales
• Nonmarket Transactions
• Underground Economy

6
Intermediate Products

• Products used to make other products already
  counted in GDP.
• Example Replacement tires for your car.

7
Secondhand Sales

• The sales of used goods.
• These things have already been counted in GDP and
  cant be counted again.

8
Nonmarket Transactions

• Transactions that do not take place in the
  market.
• Cant be measured.
• Example Homemakers jobs at home
• Cooking
• Cleaning
• Child care
• Etc.

9
Underground Economy

• Unreported legal and illegal activities.
• Examples
• Gambling
• Smuggling
• Drugs
• Counterfeiting

10
Problems with GDP

• Dont know what is included in GDP.
• Could be military stockpiles.
• Things in GDP may not actually be good for the
  world (only good for the economy).
• Building new homes could be harming the
  environment.

11
National Income Accounting

• A system of statistics and accounts that keep
  track of production, consumption, savings, and
  investments.
• Also tells us how the economy is performing.

12
GNP

• Gross National Product
• The dollar value of all final goods and services,
  and structures produced in one year with labor
  and property supplied by a countrys residents.

13
Differences from GDP

• GNP measures the income of all Americans but does
  not count in foreign made money.