AP Macroeconomics Module 11

most important use of GDP

its a measure of the size of the economy, providing us a scale against which to compare the economic performance of other years of other countries -!!!! GDP increasing in value over times means increases of prices of goods & services rather than output

aggregate output

total quantity of final goods / services produced within an economy. This is used to measure economy's growth and accuracy

**real GDP and what is include

-it doesn't include things that contribute to happiness like leasure time, housework, natural beauty etc. -It does include expenditures that make people unhappy like disease, divorce, crime, natural disasters etc.

GDP per capita

GDP divided by the size of the population, its equivalent to the average GDP per person. -use this to eliminate the effect of difference in population size -This can indicate the economy's potential for certain achievements. - A country with a higher GDP per capita can afford high expenditures on health, education, and other goods / services that contribute to a higher quality of life.

chain - linking

the government economists who put together the US national accounts have this method to measure the change in real GDP. -Uses average between GDP growth rate calculated using an early base year & the GDP growth rate calculated using a late base year. -always expressed in chained dollars which splits the difference between using early/late base years.

Real GDP

total value of all final goods & services produced in the economy during a given year. Calculate using the prices of a selected base year in order to remove the effects of price changes.

Nominal GDP

total value of all final goods / services produced in the economy during a given year, calculate with prices in the current year in which output is produced.