Download Basics of GDP

Gross Domestic Product
How Big is the
Economy?
GDP Growth Through 2005.
New GDP numbers for 2006 will be out at the
end of March
GDP = C+I+G+X-M
 Consumption
 Investment
 Govt.
spending
 Exports
 Imports
Gross Domestic Product
 GDP
is the total market
value of all final goods and
services that are
produced within the
borders of a nation in a
year.
How large is the GDP?
 In
2005 GDP
was $12.37
TRILLION
 3.5%
GROWTH for
2005.
Three Sectors Make up
GDP...
 Manufacture
Slice 1
Slice 2
Slice 3
Slice 4
Sector
 Service
Sector
 Construction
Things that GDP Measures:
Compares Countries

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
Germany
Japan
Switzerland
US
WHO HAS THE
LARGEST GDP?
WHO HAS THE BEST
GDP per CAPITA?
GDP of Selected Nations
Nation
GDP $-
GDP per
Capita
USA
12.37 Tr.
$41,800
Japan
4.95 – Tr. $30,400
Germany
2.446 -Tr
Switzerland 262-Billion
$29,700
$35,000
BUT!

There is one country
that has a higher GDP
per capita than the US.

WHAT IS IT?
THE COUNTRY IS ….



LUXEMBOURG!
GDP per capita:
$43,000
MISLEADING
STATISTIC!
 GDP:
15.9 BILLION
 Population 442,000
Poorest Countries of the World







East Timor
Somalia
Sierra Leone
Malawi
Tanzania
Burundi
All the above are
beneath $500 a year



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
The Congo
Comoros
Eritrea
Ethiopia
Afghanistan
All of this column are
under $700 a year
The Poorest (LDC)
What are final goods and
services?
 Things
that are produced
and services that are
performed that are not
used to create other
goods and services.
Final Goods:
 Film
for
personal
pixs.
 Hair cuts.
 Clothes.
 Anything
consumed.
GDP is determined by
MARKET VALUE.
 Whatever
is
actually
paid.
 GDP
includes
total money
paid for final
goods.
Final Goods vs.
Intermediate Goods and
GDP
 Intermediate
goods are
used to
produce
another
good.
 Intermediate
goods are
left out of
GDP.
Difference between GNP
and GDP?
 Lowell
is a comedian and U.S.
citizen. He works in Canada and
the U.S. He made $22,000 in the
U.S. and $15,000 in Canada.
 GNP for U.S. = $37,000; GNP for
Canada = $0.
 GDP U.S. = $22,000; GDP
Canada $15,000.
Juan’s FINAL GOOD.
 Juan
bought film for $20. He
used the film to take pictures for
his family and friends. He is the
end user of the film - so it is a
final good and added to GDP.
Helga’s INTERMEDIATE
GOOD.
 Helga
is a part-time
photographer. She is hired to
take pictures of a wedding. She
bought film for $20 and then
sold the pictures for $700. The
cost of film is not added to GDP.
What do you think?
 Mort
is a CPA. He is paid $125
by Pat to fill out his income tax
forms.
 Mort fills out income tax forms
for Pines Funeral Home. The fee
is $380.