What is GDP

Inflation

A general rise in the price level of an economy

Recession

a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. // Human words: Wide spread decline in income and employment

Problems with GDP

does not account for non-market goods, underground economy, environmental damage, leisure time or the distribution of income.

GDP

Currency value of all final goods and services produced within a country's borders

GDP per capita

Currency value of all final goods and services produced within a country's borders divided by the population

Real GDP

Currency value of all final goods and services produced within a country's borders minus the effects of inflation

Net exports

Dollar value of all goods and services produced in the United States and shipped to other countries

Investment

Dollar value of all goods and services purchased by business for the purpose of using in their business. Universities and houses counted

Consumption

Dollar value of all goods and services purchased by households

Government spending

Dollar value of all goods and services purchased by the various agencies of the United States.

GDP per capita measures

GDP/population, tells us the well-being of people

finished goods

Good that will not be sold again as apart of another good

Imports

Goods and services produced in other countries, then brought to the United States in exchange for currency

Exports

Goods and services produced in the United States, then sent to other countries in exchange for currency

Standard of living

Intangible concept that seeks to represent a country's level of economic prosperity. Correlates with GDP growth

GDP deflator equation

Nominal GDP/Real GDP x 100

business cycle

Short run movement in real GDP. Unpredictable, points out recessions

Growth rate of the economy

Rate of change of GDP for a specific time period. (New-old/old)

Aggregate Demand

The amount of goods and services ALL buyers in the economy are willing/able to buy at all the possible price levels

Aggerate supply

The amount of goods and services ALL companies are willing to produce at ALL possible price levels

Why split GDP?

Want to know where money is going

National spending approach to GDP

Y = C + I + G + NX

Factor Income Approach

Y = Wages + Rent + Interest + Profit (not as important)

GNP (Gross National Product)

total dollar value of goods & services produced by a nation at home or away