Gross Domestic Product Define GDP and what is included and not included

Gross Domestic Product The market value of all final goods and services produced annually in a country Tells a country how well its economy is doing GDP measures value using dollars GDP counts only new production

GDP Does NOT include Secondhand Transactions Transfer Payments Stock Market Transactions Nonmarket Activities The Underground Economy

GDP Counts Only Final Goods Final Goods – Goods and services sold to the final user Intermediate Goods – Are goods and services used as inputs for the production of final goods – Not produced for the consumption by the ultimate user

Comparing GDPs Nominal GDP – GDP measured in current prices (grows in 3 ways) 1.Output rises and prices remain unchanged 2.Prices rise and output is constant 3.Both output and prices rise Problem is to adjust GDP for only changes in output and not price

Comparing GDPs Real GDP – GDP adjusted for changes in prices over time GDP per Capita – GDP divided by total population

Listen and Reflect NPR’s Planet Money Podcast: Why GDP is like GPA – /why-gdp-is-like-gpa /why-gdp-is-like-gpa – Reflection Paper “How GDP is like GPA” – 3-5 paragraphs Introduction with 2-3 examples Example explained Example e Conclusion

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