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GDP

GDP. Chapter 13. GDP. Gross Domestic Product Dollar amount of all final goods and services produced within a country’s national borders in one year. Why we need it. GDP helps tell us how the economy is doing. If GDP is low, then the economy is not doing very well.

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GDP

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  1. GDP Chapter 13

  2. GDP • Gross Domestic Product • Dollar amount of all final goods and services produced within a country’s national borders in one year.

  3. Why we need it • GDP helps tell us how the economy is doing. • If GDP is low, then the economy is not doing very well. • If GDP is high, then the economy is good.

  4. How we compute GDP • Multiply all of the final goods and services produced in a 12-month period by their prices, and then add them up.

  5. Exclusions • Intermediate Products • Secondhand Sales • Nonmarket Transactions • Underground Economy

  6. Intermediate Products • Products used to make other products already counted in GDP. • Example: Replacement tires for your car.

  7. Secondhand Sales • The sales of used goods. • These things have already been counted in GDP and can’t be counted again.

  8. Nonmarket Transactions • Transactions that do not take place in the market. • Can’t be measured. • Example: Homemakers jobs at home: • Cooking • Cleaning • Child care • Etc.

  9. Underground Economy • Unreported legal and illegal activities. • Examples: • Gambling • Smuggling • Drugs • Counterfeiting

  10. Problems with GDP • Don’t know what is included in GDP. • Could be military stockpiles. • Things in GDP may not actually be good for the world (only good for the economy). • Building new homes could be harming the environment.

  11. National Income Accounting • A system of statistics and accounts that keep track of production, consumption, savings, and investments. • Also tells us how the economy is performing.

  12. GNP • Gross National Product • The dollar value of all final goods and services, and structures produced in one year with labor and property supplied by a country’s residents.

  13. Differences from GDP • GNP measures the income of all Americans but does not count in foreign made money.

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