Measuring GDP

A series of flashcards created to enhance understanding of key concepts surrounding the measurement of GDP.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a given period by factors of production located within a country.

Final Goods and Services

Goods and services produced for use, as opposed to intermediate goods.

Intermediate Goods

Goods that are produced by one firm for use in the production of another firm's goods.

Exclusions from GDP

GDP does not include the value of production from goods produced in previous periods or transactions that do not produce new goods or services.

Gross National Product (GNP)

The total market value of all final goods and services produced within a given period by the nation's factors of production, regardless of their location.

Factor Payments

Payments made to the factors of production, including wages, rents, interest, and profits.

Real GDP (RGDP)

Gross domestic product measured in terms of base year dollars, adjusted for inflation.

Nominal GDP (NGDP)

Gross domestic product measured in current dollars, not adjusted for inflation.

Circular Flow Diagram

A model that represents the flow of money, goods, and services in an economy, highlighting the interactions between households, firms, and the government.

Expenditure Approach

A method of computing GDP that measures the total amount spent on all final goods and services during a given period.

Income Approach

A method of computing GDP that measures the income received by all factors of production in producing final goods and services.

Personal Consumption Expenditure (C)

Household spending on consumer goods, divided into durable and non-durable goods.

Gross Private Domestic Investment (I)

Spending by firms and households on new capital, including equipment, inventories, and residential construction.

Government Expenditure (G)

Government spending on domestically produced goods and services.

Net Exports (NX)

The difference between exports (EX) and imports (IM), calculated as NX = EX - IM.

Limitations of GDP

GDP does not account for non-market activities, the distribution of income among individuals, or social welfare metrics.