1. Gross Domestic Product
Chapter 12

2. GDP and You GDP Affects you, but You also Affect GDP
Every time you purchase something or receive a paycheck, you contribute to the gdp

3. Gross domestic Product
Economist use a system called National income accounting to monitor the US Economy
Collects statistics on
Production
Income
Investment
Savings
This data is used by the government to determine economic policies

4. Defining GDP
The dollar value of all final goods and services produced within a country’s borders in a given year
The most important economic measure
Dollar value: total cash values of sales
Final goods and services: products sold to consumers
Produces within a country’s borders: produced within a country
In a given year: when the good was produced

5. Nominal GDP
Or current GDP
GDP Measured in current prices

6. REAL GDP
Expressed in constant or unchanging prices

7. LIMITATIONS OF GDP
Gdp does not take into account certain economic actives or aspects of life
Nonmarket activates: when we do things ourselves--caring for children, lawn care, cooking dinner, washing a car
Underground economies: market for illegal goods are not counted or selling legal activities like selling personal items (it has already been counted)
Negative externalities: unintended economic side effects have monetary value (ex. Eastman Chemical “Process upset”)
Quality of life: Additional goods and services do not always make people happier— sometimes it other things that are not counted in the gdp such as: surroundings, leisure time, and safety

8. Other output and income measures
Gross National Product (GNP): the annual income earned by a nation’s firms and citizens
Depreciation: the loss of the value of capital equipment that results form normal wear and tear

9. Influences on GDP
Aggregate Supply—the total amount of good and services in the economy available at all possible price levels
Aggregate demand—the amount of goods and services in the economy that will be purchased at all possible price level