GDP

GDP

GDP or gross domestic product is the dollar value of the final goods and services produced within a nation in a year

GDP failings: improved product quality

fails to take into account the value of improvements in product quality like personal computers

non market transactions

goods or services produced by yourself or others without payment

GDP per capita tells us

how much a country produces per person who lives in that country (avg wealth per person in a given country)

GDP doesn't tell us

how well off a person is in the country

underground economy

illegal sales of goods and services or paying cash "under the table" (includes doing favors for money, but not recorded)

GDP failings

leisure, improved product quality, bad events (LIB)

investment

money spent to improve businesses and workers (also buying a house, exception to non businesses in investment)

importance of GDP

most important use of GDP is a measure of the size of the economy, providing a scale against which to compare the economic performance of various nations (can also be used as a measure of growth and prosperity)

other things that are not counted in GDP

second hand sales, non market transactions, underground economy, goods produced in other countries (SNUG)

GDP per capita (per person)

to figure out how well off the avg person in a country, we need to take GDP and divide it by the number of people in that country

GDP failings: bad events

GDP increases with disease, divorce, crime, and natural disasters

Calculating GDP: expenditure approach

adding value of all of the final spending that is done in the economy GDP= consumption + investment + govt spending + (exports -imports)

Calculating GDP: income approach

adds up everything people made (every dollar spent is earned by others)

what is counted in GDP

counted: final goods which are goods that are ready for consumption not counted: intermediate goods which are goods that are bought from one firm by another firm to be used as inputs into the production of final goods and services (double counting)

GDP failings: leisure

typical work week in America has declined from 53 hrs to 36 hrs but GDP doesn't show this benefit