- GDP- the most important measure of growth. It is the total $ value of all final goods and services produced within a country's borders in a given year.
- GNP- the total $ value of all final goods and services by citizens of that country on its land or on foreign land. Think of it as being made by foreigners.
- Whats not counted in GDP:
- Intermediate Goods: only count final goods
- Secondhand goods: not counting used goods
- Non-market Activity: illegal drugs, babysitting, volunteering
- Financial Transactions: stocks, bonds, real estate
- Gifts: social security, scholarships, transfer payments
- What IS counted:
- Consumption: personal consumption of goods and services
- IG- Gross Domestic Private Investment: new factory equipment, construction, factory equipment maintenance, unsold inventory
- Government Spending: govt. purchases of goods and services.
- X-Net exports subtract: exports-imports
- Formula for Expenditure approach (GDP)- C+Ig+G+Xn
- Income Approach: W+R+I+P+statistical adjustment (must equal GDP)
- Wages- compensation of employees, salary supplements, health, insurance
- Rents- Tenants and landlords, least payment of corporation
- Profit- corporate profit-coorporate income
GNP: GDP+Net Foreign Factor
NNP: Net Nat'l. Product- GDP-depreciation
NDP: GDP-depreciation
Nat'l Income: GDP-Indirect business taxes-depreciation-net foreign factor
- Nominal GDP- value of output produced in current prices
- Real GDP- the value of output produced in constant or base year prices.
Terms to Know:
Price Index: measures inflation by tracking changes in the market basket of goods compared to the base year.
GDP Deflator- a price index used to adjust price index from nominal to real GDP.
Inflation: the rise in the general price level.
Inflation Rate: measures the % increase in the price level over time.
Unemployment: the percentage of ppl who do not have jobs but are in labor force.
Labor Force- the # of people in a country that are classified as employed or unemployed.
Fricitonal Unemployment: ppl that are btwn jobs
Seasonal Unemployment: ex: school bus drivers, life guards, easter bunny, santa etc.
Structural Unemployment: associated with the lack of skills or declining industry.
Cyclical Unemployment: associated with the downturns in the business cycle.
Full Employment: occurs when there is no cyclical unemployment.
Causes of Inflation:
-demand pull inflation: caused by excess of demand
-cost pull: caused by rise in per unit production cost due to increasing resource cost.
Anticipated Inflation: expecting it to happen.
Unanticipated Inflation: some ppl are hurt, some aren't.
Who ARE hurt: fixed income, lenders, creditors, savers
Who ARENT hurt: borrowers
Helpful tutorial on GDP: https://www.youtube.com/watch?v=2-n1ruKJakw
