ch. 6? - gdp and economic growth

  • gdp = the total market value of all final goods and services produced within a country within a period of time

    • its a way to measure the size of the economy and changes in productions overtime

    • it doesn’t matter the origin of the company, as long as its operating within the country, rather than ownership

    • time period matters: we always have to know what year we are talking about

    • final products: only products and services

  • gdp formula = …

  • gdp major flaws

    • home production (in-house production and consumption): difficult to measure

    • illegal/underground activities

    • gdp per capita (person) used as a proxy

  • total gdp example (2025) = 2025 prices x 2025 output

    • then do the same for all the different products, then add them up

  • real gdp = better indication of what changes in output

    • real gdp growth rate = (current real gdp) - (previous real gdp) / (previous real gdp) x 100%

  • economic growth = real gdp growth

    • “last year, economic growth was 5 percent = last year, the real gdp growth was 5 percent.”

  • total output= total expenditure on domestic goods and services

  • total expenditure = consumer spending (C) + business investments (i) + gov. spending (g) + net export (NX)

    • net export is calculated by doing total export minus total import

      • it can be negative

  • sales tax = sales x sales tax rate

  • gross national product…

    • includes domestic tirais overseas investments

    • excludes foreign companies investments in the country