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Economic Indicators and GDP

Economic Indicators and GDP. Chapter 12 Section 1. Gross Domestic Product (GDP). National Income Accounting Look at production, income, investment, and savings Department of Commerce. GDP. Defining GDP

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Economic Indicators and GDP

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  1. Economic Indicators and GDP Chapter 12 Section 1

  2. Gross Domestic Product (GDP) • National Income Accounting • Look at production, income, investment, and savings • Department of Commerce

  3. GDP • Defining GDP • The dollar value of all final goods and services produced within a country’s borders in a given year • Dollar value – total cash value • Final Goods and Services – no intermediate goods • Produced within a country’s borders • In a given year – excludes resells (ex: cars)

  4. GDP • Expenditure Approach • Consumer g&s • Durable and nondurable goods • business g&s • government g&s • net exports • Exports - imports

  5. GDP • Income Approach • Add up all the incomes in the economy minus the dollar value for the goods and services purchased from other firms (material costs) • In theory, Income and Expenditure Approach should give you the same total

  6. Nominal vs. Real GDP • Nominal GDP • GDP calculated in current prices • Real GDP • GDP expressed in constant, or unchanging, prices • Use a base year of prices to compare things, giving a more accurate depiction of the economy • Changes in price should not affect GDP

  7. Limitations of GDP • Nonmarket Activities • The Underground Economy • Negative Externalities • Quality of Life • More stuff = better life????

  8. Other Output and Income Measures • Gross National Product (GNP) • Annual income earned by a nation’s firms and citizens • Does not account for depreciation of capital equipment • Net National Product (NNP) • GNP – cost of depreciation • National Income (NI) • Personal Income (PI) • NI – reinvested profits, income taxes, SS taxes • Disposable Personal Income (DPI) • Money you have to spend after taxes

  9. Influences on GDP • Aggregate Supply • Supply curve for the entire economy • Compare Real GDP (x-axis) and price level (y-axis) • Price level – the average of all prices in the economy • Aggregate Demand • The amount of goods and services in the economy that will be purchased at all possible price levels

  10. Aggregate Supply and Demand

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