Measuring Output and Income

Nominal gross domestic product (GDP)

A measure of GDP in which the quantities produced are valued at current year prices

• Nominal GDP measures the current dollar value of production
  

Nominal GDP “Formula”

C + I + G + NX

Intermediate goods

Good that are used to build or make another product that will be subsequently sold

Final goods and services

Goods and services that are sold to the end user and are not used to produce another product for subsequent sale

Consumption (C)

All expenditures made by households on goods and services, like clothing, food, electronic, and recreation during a given time period

Gross investment (I)

The dollar value of all new capital purchased (as investment) and the expansion of inventories in an economy during a given time period

• Classified into business fixed investment, residential investment, and inventory investment

  • Also called investment

Government purchases (G)

All final goods purchased by federal, state, and local governments during a given time period as well as all final services purchased from labor resources

• ex. tanks, police cars, office supplies

  • ex. teachers, airport security, police

Imports (M)

Goods, sercices, or resources produced abroad and sold domestically

Exports (X)

Goods, sercices or resources produced domestically and sold abroad

Net exports (NX)

The difference between exports and imports

NX=X-M (Net exports = Exports - imports)

GDP does not include what?

Used goods

Consumption (C)

All expenditures made by households on goods and services, like clothing, food, electronics and recreation during a given period

Consumption “formula”

durable goods + nondurable goods + services

Consumer durables

Goods that have an average useful life of three years or more

Consumer non durables

Goods that have an average usefule life

Services

Output, often intangible of the direct activies of another person

Transfer payment

A payment made by the government that does not require an exchange of economic activity in return

• often take the form of payments to households

Nominal gross domestic product (GDP)

A measure of GDP in which the quantities produced are valued at current-year prices. Nominal GDP measures the current dollar value of production

Expenditures approach