Chapter Gross Domestic Product

Gross Domestic Product

The market value of all final goods and services produced in a country during a period, typically one year.

Components of GDP

Consumption Spending, Investment Spending, Government Expenditure, Net Export.

Consumption Spending

Spending by households on goods and services, excluding spending on a new house.

Investment Spending

Spending by firms on new factories, office buildings, and additions to inventories, plus spending on new houses.

Government Expenditure

Spending by federal, state, and local governments on goods and services.

Net Export

The value of exports minus the value of imports, often negative.

Shortcomings of GDP

Does not measure household production, underground economy, wellbeing aspects, or income distribution.

Real GDP vs

Nominal GDP is evaluated at current-year prices, while Real GDP is evaluated at base-year prices.

GDP Deflator

A measure of the price level calculated by dividing Nominal GDP by Real GDP.

Inflation Rate using GDP Deflator

(New-Old)/Old x 100 = % change formula.

GNP stands for

Gross National Product

Gross National product

includes overseas production by citizens of a nation.