1. GDP Gross Domestic Product
Definition- the market value $$ of all final goods and services produced within a country in a given period of time
GDP is used as an indicator of economic progress, it is not a measure of well-being (for example, it does not account for rates of poverty, crime, or literacy).
GDP is the total OUTPUT of the country; therefore, it is a measure of economic growth when compared over periods of time. Changes in output will affect GDP. Real GDP is a more helpful measure than nominal GDP because real GDP is adjusted for inflation, but nominal GDP is not. Expressing inflation in terms of a dollar value that has not been adjusted for inflation means that output might be overstated. That is, a change in nominal GDP might come from higher price levels, not higher output. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services because for an economy as a whole, income must equal expenditure.
OTHER INFORMATION
GDP is the value of the total goods and services produced within the boundaries of the country during a given time period, whether by domestic or foreign supplied resources. These resources do not have to be sold in that year, but must be produced within that year.
Definition- the market value of all final goods and services produced within a country in a given period of time
Measures the total income of a nation. It is thought to be the best single measure of a society’s economic well-being.
GDP is a monetary measure. That is, it is expressed in terms of currency. It can either be a percent change from one time period to another, or a total monetary value.

2. Nominal vs. Real
Nominal GDP- production of this year’s final goods and services valued at this year’s prices
Real GDP- nominal GDP adjusted for inflation
KEY POINTS
Real GDP is a more accurate measure of the current level of output than nominal GDP because real GDP adjusts for changes in price level which could distort the change in the real value of goods and services produced by an economy in a given time period.
Nominal GDP- the production of this year’s goods and services valued at this year’s price
Real GDP- nominal GDP adjusted for inflation. This is calculated with the GDP deflator.
OTHER INFORMATION
Real vs. nominal GDP
GDP measures the total spending on goods and services in all markets in the economy. If total spending rises from one year to the next, one of two things must be true:
the economy is producing a larger output of goods and services, or
goods and services are being sold at higher prices.
To obtain a measure of the amount produced that is not affected by changes in prices, we use real GDP, the production of goods and services valued at constant prices. We calculate real GDP by choosing one year as a base year to express the prices in. Real GDP uses constant base year prices to place a value on the economy’s production of goods and services.

3. What are the components of GDP?
Personal Consumption Expenditures
(C)
Investment
(I)
Government
(G)
Net Exports
(NX)
Fixed Investment
Inventories
Exports
Imports
Nonresidential
Residential
KEY POINTS
Expenditures on final goods and services are divided into four types: consumption, investment, government purchases, and net exports (exports-imports) of goods and services.
Consumption (C)- is the expenditure by households on consumption goods and services. It includes durables, non-durables, and services.
Investment (I)- is the purchase of new capital goods (tools, instruments, machines, buildings, and other constructions) and additions to inventories. In other words, it is spending by firms (and households on residential housing), including: final purchases on machinery, equipment and tools, all residential and commercial construction, and additions to inventory.
Government purchases of goods and services (G)- are purchases by all levels of government of goods and services from firms. It excludes transfer payments (welfare spending and unemployment compensation).
Net exports of goods and services (X-IM or NX)- is the value of exports of goods and services minus the value of imports of goods and services. It is the value by which foreign spending on American goods and services exceeds American spending on foreign goods and services.
GDP excludes non-production transactions such as: financial transactions, second-hand sales/used goods, the black market/underground production, household production, bartered goods, and transfer payments.
GDP = C + I + G + NX

4. How much of GDP is each component?
Average Percent of GDP since 2003
Component % of GDP
Government %
Investment %
Consumption (PCE) %
KEY POINTS
The chart shows the average percent since 2003 of GDP growth for each component of GDP. Consumption is the highest proportion of GDP, at 70%. Government spending accounts for 19% of GDP growth on average and investment, 16%. Net exports has averaged -5%. Since imports have exceeded exports, net exports has been a drag on GDP. Changes to components of real GDP will change the overall level of real GDP.
OTHER INFORMATION
Calculated using data from the Bureau of Economic Analysis (BEA):
Net Exports %
GDP %
Source: Bureau of Economic Analysis

5. USA REAL GDP growth
The calculation of the annual growth rate of GDP volume is intended to allow comparisons of the dynamics of economic development both over time and between economies of different sizes. For measuring the growth rate of GDP in terms of volumes, the GDP at current prices are valued in the prices of the previous year and the thus computed volume changes are imposed on the level of a reference year; this is called a chain-linked series. Accordingly, price movements will not inflate the growth rate.
-2.6
2.7 forcast