Gross Domestic Product Approaches and Measurement

Vocabulary terms and definitions covering GDP calculation approaches, exclusions, categories of goods, and real versus nominal GDP from Clara Kolstad's Writing Assignment #2.

Income approach

An approach to measuring GDP that takes the income from the factors of production within an economy.

Production approach

A way of measuring GDP that estimates the value of economic output while removing intermediate goods used in the process.

Expenditure approach

An approach that measures GDP by calculating the spending of many groups within an economy.

Used goods

Goods bought used from someone or a place.

Intermediate goods

Ingredients or goods that produce other goods, which are only counted in the final product.

Transfer payments

Payments made from the government to a person without the exchange of a good or service.

Household production

Work done at home that is unpaid and does not get counted in GDP.

Illegal goods

Goods sold through illegal websites or markets that are not included in GDP calculations.

Non-durable goods

Goods that have an expiration date or a shorter life (such as clothing and food) and are often purchased more frequently than durable goods.

Durable goods

Goods that live a long time and are depreciable, such as cars, freezers, and refrigerators.

Real GDP

A measure adjusted for inflation that allows us to see if an economy is producing more goods and services over time and measures economic growth over years.

Nominal GDP

A measure used for a specific year's prices that reflects the dollar value of goods and services.

Consumption

The most used category in the expenditure approach because people spend more money on everyday needs like goods and services.

Services sector

The economic sector that accounts for a large amount of GDP in the production approach because companies and individuals spend more on services than physical goods.