Gross Domestic Product GDP The total dollar value of all final GOODS and SERVICES produced in a country in a year.

Types of GDP Current Dollar (Nominal) GDP Gives us the current size of our economy Real GDP – adjusted for inflation Used to calculate growth rates Percentage change real growth over time Per Capita GDP – per person One person’s share GDP – PPP Purchasing Power Parity Adjustment for price differences in different countries

Monetary Measure Dollar value is only way to compare the value of items in our society. Price is a measure of society’s valuation. Price may not reflect individual’s valuation.

Measure Final Sales Only Avoid double counting Example – wool suit $200.00 Production stage Sales value Value Added Sheep Ranch $50.00 $50.00 Wool Processor $75.00 $25.00 Suit Maker $100.00 $25.00 Wholesaler $140.00 $40.00 Retailer $200.00 $60.00 TOTAL $ 565.00 $200.00

Non-Productive Transactions are not counted . . . Public and Private Transfer Payments Welfare, Social Security, Unemployment Charity – Red Cross, Salvation Army Purely Financial Transactions Stock, Bond, Investment Trades Brokers fees are part of GDP Secondhand Sales Was part of GDP in previous year Used cars, thrift sales, etc.

Non – Market Production Not counted Difficult to measure Would count if done in market Do- it - yourselfers Housework Volunteers Barter activities

GDP Expenditure Approach GDP = C + Ig + G + (EX – IM) C = Personal Consumption Ig = Gross Private Domestic Investment G = Government Purchases of Goods & Services (EX – IM) = Net Exports EX = Exports IM = Imports

C = Personal Consumption Largest of the accounts 2/3 of GDP All consumer spending Durable goods Non-durable goods Services

Ig = Gross Private Domestic Investment Purchases of machinery, equipment, tools by businesses All construction – including housing All changes in inventory

G = Government purchases All levels – Federal, State, Local Does not include transfer payments Figured at cost, not market value

Net Exports (EX – IM) Add Exports (EX) Subtract Imports (IM) Spending on goods & services by foreigners Subtract Imports (IM) Personal Consumption on goods & services produced in a foreign country

GDP doesn’t measure Social Welfare Bads & Disservices Drug trade Prostitution Gambling Add 15% ? (estimates 5% – 25%)

GDP numbers 2011:III annual rate (billions $) Account Current Dollars GDP $15,198 C $10,803 Ig $ 1,918 G $ 3,050 (EX - IM) - $ 573 EX $ 2,117 IM $ 2,690 Per Capita GDP $48,633

Real GDP Annual % Changes 1992 3.3% 2001 0.8% 1993 2.7% 2002 1.6% 1994 4.0% 2003 2.5% 1995 2.5% 2004 3.6% 1996 3.7% 2005 2.9% 1997 4.5% 2006 2.8% 1998 4.2% 2007 2.0% 1999 4.5% 2008 -0.3% 2000 3.7% 2009 -3.5% 2010 3.0%

Country & GDP (in billions) 2010 est World Bank USA $14,582 #1 China $ 5,878 #2 Will take 18 years for China to pass U.S. if U.S grows 3% China grows at 9% Japan $ 5,497 #3 Germany $ 3,309 #4 France $ 2,560 #5 U. K. $ 2,246 #6 Brazil $ 2,087 #7 Italy $ 2,051 #8 India $ 1,729 #9 Canada $ 1,574 #10 Russia $ 1,476 #11 Spain $ 1,407 #12 Mexico $ 1,039 #13

Country & GDP (PPP) (in billions) 2010 est CIA World Factbook USA $14,660 #1 China $10,090 #2 Japan $ 4,310 #3 India $ 4,060 #4 Germany $ 2,940 #5 Russia $ 2,223 #6 Mexico $ 1,567 #11 Canada $ 1,330 #14 Poland $ 721 #20 UAE $ 246 #50 Turkmenistan $ 36 #100 Monaco $ .976 #200 Tokelau $ .0015 #226

Country GDP Per Capita 1 Monaco $172,676 2 Liechtenstein $134,915 3 Luxembourg $106,252 4 Bermuda $ 88,747 5 Norway $ 78,409 11 United States $ 45,745 20 France $ 40,663 50 Saudi Arabia $ 13,901 75 Maylasia $ 6,909 100 Angola $ 4,069 105 China $ 3,749 190 Burundi $ 163