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Understanding Gross Domestic Product

The document discusses the measurement and components of Gross Domestic Product (GDP). GDP is defined as the market value of all final goods and services produced within a country in a given period of time. GDP includes output valued at market prices, only includes final goods and services, includes both goods and services, includes currently produced items, measures production within a country's borders, and measures production over a specific time period like a year. GDP has four main components: consumption, investment, government purchases, and net exports.

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74 views11 pages

Understanding Gross Domestic Product

The document discusses the measurement and components of Gross Domestic Product (GDP). GDP is defined as the market value of all final goods and services produced within a country in a given period of time. GDP includes output valued at market prices, only includes final goods and services, includes both goods and services, includes currently produced items, measures production within a country's borders, and measures production over a specific time period like a year. GDP has four main components: consumption, investment, government purchases, and net exports.

Uploaded by

Toufiq Tonoy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Economic Analysis For

Managers

Lecture 2
10 July 2020
THE MEASUREMENT OF
GROSS DOMESTIC PRODUCT
 Gross domestic product (GDP) is a measure
of the income and expenditures of an
economy.
THE MEASUREMENT OF
GROSS DOMESTIC PRODUCT
 GDP is the market value of all final goods and
services produced within a country in a given
period of time.
THE MEASUREMENT OF
GROSS DOMESTIC PRODUCT
 “GDP is the Market Value . . .”
 Output is valued at market prices.
 “. . . Of All Final . . .”
 It records only the value of final goods, not
intermediate goods (the value is counted only once).
 Hallmark Card: Paper is an intermediate good.
 “. . . Goods and Services . . . “
 It includes both tangible goods (food, clothing, cars)
and intangible services (haircuts, housecleaning,
doctor visits).
THE MEASUREMENT OF
GROSS DOMESTIC PRODUCT
 “. . . Produced . . .”
 It includes goods and services currently
produced, not transactions involving goods
produced in the past.
 “ . . . Within a Country . . .”
 It measures the value of production within the
geographic confines of a country.
THE MEASUREMENT OF
GROSS DOMESTIC PRODUCT
 “. . . In a Given Period of Time.”
 It measures the value of production that takes
place within a specific interval of time, usually
a year or a quarter.

 GDP includes all items produced in the


economy and sold legally in markets.
REAL VERSUS NOMINAL GDP
 Nominal GDP values the production of goods
and services at current prices.
REAL VERSUS NOMINAL GDP
 Real GDP values the production of goods and
services at constant prices.
THE COMPONENTS OF GDP
 GDP (Y) is the sum of the following:
 Consumption (C)
 Investment (I)
 Government Purchases (G)
 Net Exports (NX)
Y = C + I + G + NX
THE COMPONENTS OF GDP
 Consumption (C):
 The spending by households on goods and
services, with the exception of purchases of
new housing.
 Investment (I):
 The spending on capital equipment,
inventories, and structures, including new
housing.
THE COMPONENTS OF GDP
 Government Purchases (G):
 The spending on goods and services by local,
state, and federal governments.
 Does not include transfer payments because
they are not made in exchange for currently
produced goods or services.
 Net Exports (NX):
 Exports minus imports.

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