Gross Domestic Product (GDP) Overview

These flashcards cover key concepts related to Gross Domestic Product (GDP) including its definition, components, measurement challenges, the impact of inflation, and economic data distinctions.

Gross Domestic Product (GDP)

The total monetary value of all final goods and services produced within a country's borders in a specific time period.

Constituent parts of GDP formula

C + I + G + NX, where C is consumption, I is investment, G is government spending, and NX is net exports.

Intermediate goods

Goods that are used in the production of final goods and not counted in GDP to avoid double counting.

Nominal economic data

Economic data measured in current prices without adjusting for inflation.

Real economic data

Economic data that has been adjusted for inflation to reflect true purchasing power.

Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, commonly used to assess inflation.

Underground economy

Economic activity that is not reported to the authorities and is not included in GDP calculations.

Non-market production

Goods and services produced but not sold in markets, such as home care or volunteer work, which are typically excluded from GDP.

Inflationary problems in GDP measurement

Inflation can distort GDP figures by inflating nominal values and obscuring true economic growth.

Real GDP calculation example

If nominal GDP rises from $500B to $900B and CPI rises from 100 to 150, the real GDP would need to be calculated based on inflation adjustments.