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GDP. Gross Domestic Product. GDP. National income accounting- system that collects data on production, income, investment, and savings. National Income and Product Accounts- all the above data is stored and analyzed by the US Commerce Department.
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GDP Gross Domestic Product
GDP • National income accounting- system that collects data on production, income, investment, and savings. • National Income and Product Accounts- all the above data is stored and analyzed by the US Commerce Department. • Used to determine Fiscal and Monetary policies of government
GDP • Gross domestic product-the dollar value of all final goods and services produced within a country in 1 year • Dollar value is total selling prices of all of goods and services • Final goods and services are products in final form sold to consumers • NOT intermediate goods such as steel.
Expenditure Approach • Output-Expenditure Approach • Economists estimate the annual amount spent (expenditures) on • 1. Consumer goods and services • 2. Business goods and services • 3. Government Goods and services • 4. Net exports or imports of goods and service • GDP is found by adding up the 4 categroies
GDP Durable goods- consumer goods with long life ex- refrigerator, cars, DVD Non-durable goods-short term consumer goods such as light bulbs, shoes, food. Economists can also use the income approach **Adding up all the incomes in the economy Add up the incomes of a country. **Economists actually use both to fine tune final GDP numbers
Nominal vs Real GDP • Nominal GDP- GDP measured at current prices in that current year. Inflation may skew and make GDP not accurate. • Real GDP- use of a base year or constant price to calculate GDP. Calculations do not fluctuate with inflation or price increases. • Must use 2 years to calculate real GDP
Limitations • Nonmarket activities- GDP does not include services we do for ourselves • No account of under the table transactions- includes black market but also cash exchanges • Does not reflect quality of life
Other Measurements • GNP- gross national product • Annual income earned by U.S. owned firms and U.S. citizens • Does not account for depreciation of lost value from wear and tear on machinery • GNP-depreciation=Net National Product • NNP-taxes=National income • Pg 306
What influences GDP • Aggregate Supply-a supply curve for the whole economy. The total amount of goods and services in the economy available at all possible price levels • Aggregate Demand- the amount of goods and services in the economy that will be purchased at all possible price levels • Figure 12.6 shows equilibrium