Calculating GDP
goods made in a year like cars, add to only that year gdp
Avoid intermediate goods like buying ingredients for your own bakery
Illegal goods also are not counted
Money has to change hands to count
Depreciation measures the total loss in capital asset value over time, calculated by multiplying the initial capital stock by the annual depreciation rate:
Net Investment is gross investment minus depreciation: \text{Net Investment} = \18\text{M} - \
2 ways GDP is calucated
Expenditure Approach: This method sums total spending on the nation's finished goods and services across all sectors. Like business sales records
Income Approach: This calculates total income earned by individuals and businesses, including wages, profits, rents, and taxes, minus subsidies.
Statistical discrepancy should be 3-5% as a percentage. Anything more than 5 is bad.
D= income method - expenditure method / x100 expediture method
Expenditure Method
Gross → Total ( includes depreciation)
private→ (Not government)
domestic→ ( In the nation)
investment → Expanding/ upgrading business, inventory, new real estate.
Depreciation : Loss in value of assets due to wear and tear.
Government purchases → These are the expenses incurred by the government on goods and services, including public infrastructure, education, and defense.
Net exports → The value of a country's exports minus the value of its imports, which reflects the trade balance and can influence overall economic growth. ( Trade growth)
Income method
Employee compensation → This encompasses wages, salaries, and benefits paid to employees
Rental income → This refers to the income received by property owners from tenants for the use of their properties, contributing to the overall income generated in an economy.
3. Interest income
Corporate profits → This includes the earnings that corporations retain after paying taxes and dividends, reflecting the overall profitability and health of the business sector.
Dividends → These are payments made by corporations to their shareholders, typically derived from profits,
6. Taxes paid on income earned from production. and include various forms of taxation such as corporate income tax, personal income tax, and capital gains tax, all contributing to government revenue and economic measurement.
Consumption of fixed capital, depreciation → This represents the reduction in the value of physical assets over time due to wear and tear,
Any money you spend outside of the US build to that countries GDP.
Real GDP per capital equation is : Real GDP/ Population
400 ×230=92,000
200000× 100 =20,000,000.
2,500 ×15=37,500
10000×1=10,000
year 2020 = 20,139,500
420× 230=126,000
2000000×100=250,000,000
2,800× 15=42,000
8000 × 1=8,000
year 2021 = 20,156,600
Growth rate 20,146,600- 20,139,50 x100
20,139,500
= 0.035%
1529.7B
exam review
FUndamentals:
-opportunity cost
matginal cost
production possibilities
circular flow
Institutions
-Specialization and trade
Rule of law
property rights
competitive marktes
entreprenurship
financial institutions
GDP
components ( C,I,G,NX)
DEFINITION
Expenditure vs income method
real gdp
GDP per capital
Growth
-growth rate calculation
growth moves ppf
Rule of 72
Unemplymoent and inflation
buisness cycle phases
unemployment definition
calculate unemployment
frictional , structural, cyclical
natural rate of unemplyment
Inflation
CPI
calcuation of inflation rate
real income
real/ normalish interest rate
who is harmed/ helped by unexpected inflation?
Demand
-Law of demand
quantity demanded vs demand
determinants
SUPPLY
law of supply
quantity supplied vs supply
determants
equilibrum -
shortge/ surplus
price floor/ price ciling