Chapt. 11- Gross Domestic Product (GDP)

The system used to measure the aggregate income and expenditures for a nation

-The market value of all FINAL GOODS and SERVICES produced in a nation during a period of time - Usually per year -$ value of all goods and services produced in your country

Finished goods and services produced for the ultimate user

Goods and Services used as inputs for the production of final goods

Intermediate goods and only count final goods and services

GDP measures value using dollars, rather than a list of the number of goods and services

-Secondhand transactions -Used cars and homes -Nonprofit Transactions -Transfer Payment -Intermediate Goods

A government payment to individuals, not in exchange for goods or services currently produced -EXP: welfare checks, Food Stamps

such as: giving gifts, stocks, bonds, transfer payments

A model that show us how all the pieces of the GDP puzzle fit together

PRODUCT MARKETS --> Goods & Services --> HOUSEHOLDS--> supply--> FACTOR MARKETS-->Factors of Production --> BUSINESS--> Supply--> PRODUCT MARKETS HOUSEHOLDS--> Spending--> PRODUCT MARKETS--> Demand --> BUSINESS --> Factor Payments --> FACTOR MARKETS --> Demand --> HOUSEHOLDS

The national income accounting method that measures GDP by adding all the spending for final goods and services

1. Consumption- anything that we individual buy 2. Investment - capital investment (machinery) 3. Government- state, local 4. Foreign (X-M)- exports or imports

C + I + G + (X-M)

-nonmarket transactions- (being done domestically in your home) -Distribution, kind, and quality of products -Neglect of leisure time- (one country works harder than the other but both have same GDP) -Underground economy- (Illegal things, black market) -Economic Bads- (Family breakup, alcoholic, divorce, environmental degradation)

GDP is a quantitative, rather than qualitative, measure of the output of goods and services

-National Income -Personal Income -Disposable Personal Income -Nominal and Real GDP - GDP chain price index

the total earned by resource -owners including wages, rents, interest, and profit

GDP-Depreciation

the total income received by households that is available for consumption, saving, and payment of personal taxes

National Income- Profits- FICA + Transfer Payments

The amount of income that household have to spend or save after payment of personal taxes

Personal Income- Personal Taxes

The value of all final goods based on the prices existing during the time period of production -based on previous years -actual prices, unadjusted for inflation

The value of all final goods produced during a given time period base on the prices existing in a selection base year -measures output in a constant $, so that the economic output of one year can be accurately compared to a previous year

-Price stay the same, output increases -Output stay the same, price increases -Combination of both

a measure that compares changes in prices of all final goods during a given period to the prices of those goods in a base year -base year will always be 100

nominal GDP/ GDP Chain Price Index *100

Prices usually rise so GDP is deflated by the amount of inflation to arrive at real GDP -Based on GDP price index

Falling prices deflates GDP

Falling prices inflates GDP, while rising prices deflates GDP