What is GDP? EXPENSE INCOME The total dollar value of all final goods and services produced in the nation during a single year. There are two [2] methods to calculating GDP: EXPENSE METHOD (most common) and INCOME METHOD. EXPENSE GPD = Consumer + Investment + Government + Exports (N) INCOME GDP = Wages +Interest + Rents + Profits

What GDP is NOT Intermediate Goods Not the parts in the car, but the car itself After-market car parts DO COUNT!

What GDP is NOT 2nd Hand Goods Your grandma’s ugly oriental vase you sell at a garage sale for $.75

What GDP is NOT Purely Financial Transactions Money earned on investments does not produce anything – (although it may be spent on something that will)

What GDP is NOT Transfer Payments Similar to investments, money the government pays out in welfare (food stamps, unemployment checks) – although purchases of final goods made with these monies DO!

What GDP is NOT Unreported legal income Tips, cash payments “under the table”

What GDP is NOT Illegal Activity “Well duh” … of course it doesn’t count!

What GDP is NOT American business activity outside the U.S.A. That is counted in GNP – Gross National Product

What GDP is NOT Labor not associated with any income A “work at home” parent or a volunteer at a food bank