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Download GDP Unit 2 Lesson 1
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GDP GDP (GROSS DOMESTIC PRODUCT GDP All final goods produced in a year. Does not include intermediate products Domestically! Ex. GM makes a Cadillac in Michigan GM makes a Buick in China ^China’s GDP Components of GDP “C” Consumer spending- Personal consumption expenditures 1. Durable Goods- (Cars appliances) 2. Non-Durable Goods-(foods, household products) 3. Services- (Doctors, lawyers) Components of GDP “I” Business Gross private domestic investment Factories, machines, technology Components of GDP “G” Government Spending Expenditures on goods and services that the government consumes in providing public services Public works projects, roads, buildings How does the government make money? Taxes- benefit unemployment, social security Components of GDP “Xn” Net exports Value of exports (X) Minus imports (n) Xn=X-n Can be a negative number U.S GDP U.S GDP is around 18.5 trillion 4 components of GDP C= 71% I= 13% G= 20 Xn= -4% Underground economy 8% of U.S GDP goes unrecognized Thailand 54% goes unrecognized What isn’t captured in GDP? Socio economic status Time spent at work Amount of saving per person (per capita) Environmental affects Expenditure Approach How to calculate GDP GDP=C+I+G+Xn Ex. C= 5 billion I= 4 Billion G= 7 billion X= 6 billion N=7 billion Nominal Vs. Real: Day 2 Nominal- at current price Real- at constant price Adjusted for inflation over time Ex: How much did a 1987 Mustang cost in 1987? Real GDP tends to show increases Real GDP Real GDP=Nominal GDP/GDP Deflator x 100 Rising-economic expansion Falling-recession Inflation Rate is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling General rise in prices Decreasing purchasing power Inflation rate=GDP Deflator current year/GDP Deflator Previous year-1x100 Nominal GDP Nominal GDP= Real GDP x GDP Deflator/100 Current prices GDP Deflator GDP Deflator= Nominal GDP/Real GDP x 100 is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.
