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GDP
Dollar value of all final goods and services produced within a countries borders in a year
How is GDP used
comparing gdp of one year to another to tell us if there is growth
comparing gdp before and after a policy to see if it was effective
What is included in GDP?
C - Consumer Spending IB - Business Investments G - Government Spending Nx - Exports-Imports so GDP = C+IB+G+Nx
What is not included in GDP?
PAPAYAS. P - Payments from government (Non production transaction) A - Anything Illegal (Non Market) P - Products that arent final (intermediate goods) A - Anything Used (Non Production) Y - Your leisure time (Non Market) A - Anything for which you dont get paid for S - Stocks and Bonds (Non production)
What is GDP not used for?
environmental quality and resource depletion
quality of life
Poverty and economic inequality
What is the difference between Real GDP and Nominal GDP
Nominal GDP is what you see
Nominal GDP Formula
C+IB+G+Nx
GDP Per capita formula
GDP/population or RGDP/population
Real GDP (RGDP) formula
RGDP = (Nominal GDP/Deflator) x 100
GDP Growth rate / output formula
((Current year's GDP - Last year's GDP)/ (Last year's GDP)) x 100
((RGDP2-RGDP1)/(RGDP1)) x 100
GNP
Total market value of all final goods and services in a year from factors of production (resources). It's owned by the countries resources
Why do some countries have higher GDPs?
its usually due to production...
economic systems
private ownership of property
education levels
Kapital Stock
Efficient financial institutions
Free Trade
What is inflation
A rise in general price level
What is the normal economic growth?
its usually 2-4%
What should happen in order for economic growth to be real?
Inflation should always be less than economic growth rates
Causes of inflation
Printing too much money demand - pull inflation cost - push inflation
Who is hurt by inflation?
fixed income receivers Government Workers Landlords Savers Creditors
Who is helped by inflation
Flexible income receivers Debtors
What is the CPI?
Measures the cost of living over time
How is CPI calculated?
Fix the basket
Identify the goods and services a customer buys
Find Prices
Calculate basket total
Choose a base year
Note: CPI doesn't include taxes or investment items
What is the CPI formula?
CPI = (current cost of basket/base year) x 100
GDP Deflator formula
(Nominal GDP/Real GDP) x 100
In 1995
country X's overall CPI was 200
Country X has a CPI rate of 312.7 in 1996. The same country X has a CPI of 420.5 in 2006. What is the inflation rate?
(420.5-312.7)/312.7 x100 = 34.47% is the inflation rate
Note 
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