Gross Domestic Product

GDP

Market value of final goods and services produced within a nation in a year

Final Goods

Goods ready for consumption, avoiding double counting

Intermediate Goods

Goods bought from one firm by another to be used as inputs into the production of final goods and services

Second-hand Sales

Resold items from consumer to consumer, not counted in GDP

Nonmarket Transactions

Goods or services produced by oneself that would have been performed by a firm within the economy, not counted in GDP

Underground Economy

Illegal sales of goods and services or paying someone cash under the table, not counted in GDP

Financial Assets

Stocks and bonds not counted in GDP as they do not represent the production or sale of goods and services

Expenditure Approach

Calculation of GDP using the formula Y = C + I + G + (X - IM)

Consumption

Spending done by the average consumer within the economy, largest portion of GDP

Investment

Current spending to improve output or productivity for businesses and workers

Government

Purchases final goods, services, and invests in infrastructure, excluding government transfers

Exports

Domestically produced goods or services bought by foreign consumers

Imports

Consumption of goods or services produced within other nations

Nominal GDP

Value of all final goods and services at current prices of that year

Real GDP

Value of all final goods and services using prices from a base year

GDP Deflator

Price index always equal to 100 in the base year

Per Capita Output

GDP/population, used to compare large countries to small countries

GDP Shortcomings

Imperfect measure of economic prosperity and growth, affected by nation size, leisure, product quality, disease, divorce, crime, and natural disasters