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Factors of Production and Measuring the Economy • Goods: things we make and purchase. • Services: work performed by someone in exchange for payment. Natural Resources Entrepreneurs 4 Factors of Production Capital/ Capital Goods Labor (Human Resources) Natural Resources • “gifts of nature” • These make production possible • Examples? Labor (Human Resources) • The workforce • Supplies knowledge, skills, etc. to get work done Capital/Capital Goods • Capital refers to money needed to produce goods and services. • Capital Goods are manufactured goods used to make other goods and services. • Examples: machines, buildings and tools Entrepreneurs • People who start new businesses, create new products, or improve on a process. • Can you think of any specific entrepreneurs? Measuring the Economy • Gross Domestic Product (GDP): The total value (in $$$) of all the final goods and services produced in a country in one year. GDP continued… • Economists use the GDP to analyze how the economy is doing. • The GDP is also an indicator of a country’s standard of living, the quality of life based on the possession of necessities and luxuries that make life easier. Weaknesses of the GDP • It is not a measure of a society’s overall well-being. • Statistics can be misleading. • GDP measures quantity (number), not the quality of goods. Measuring the Economy • Net Domestic Product (NDP): Another way to measure the economy. NDP subtracts the loss in value (depreciation) of capital goods from the GDP.