The Measurement of Macroeconomic Performance

GDP

Gross Domestic Product- the primary measure of the overall productive output of the U.S. economy

The total market value of all final goods and services produced in a given year within the United States

Intermediate goods

Goods needed to create the final product ex. Ford needs tires, breaks, stereo equipment, seat etc. to make a car

Final goods

The completed product that is being sold ex. Ford automobile

Real GDP

A way of comparing GDP from one year to another (apples to apples)

Nominal GDP

The dollar value in that particular year’s dollar and what it can buy

What doesn’t classify as GDP

Purely Financial Transactions (Social Security + Welfare), Private Transfer payments (Cash given from friends and family), Stock market transactions (stocks and bonds), Secondhand Sales (used car, ebay, garage sales, illegal g&s)

Why do Illegal goods and services not count towards GDP

There’s no way of tracking and recording the purchases

Expenditure Approach

Sum of all money spent in buying the output

C + Ig + G + Xn

Consumer spending (70%)

Business Investment (15%)

Government purchases (20%)

eXports (net) (negative #)

Consumer spending (C)

Final goods and services bought by consumers

Business Investment (Ig)

All final purchases of machinery, equipment, and tools by businesses + construction (including household)

Government Purchases (G)

Government purchases of g&s and infrastructure

Net Exports (Xn)

Exports - Imports

Income approach

income derived from producing an output

value added approach

the difference between the cost of inputs to production and the price of output

GDP deflator

a tool to allow us to compare GDP from one year to another