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Unveiling GDP: The Core of Economic Indicators

Discover the essence of Gross Domestic Product (GDP) - the financial heartbeat of a nation. Learn what it comprises, its components, relevance, and limitations. Uncommon insights into economic well-being and growth.

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Unveiling GDP: The Core of Economic Indicators

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  1. WHAT’S IN GDP? An activity for “The ABCs of GDP”

  2. What is gross domestic product (GDP)? • Currency value (such as U.S. dollar) of all final goods and services produced within a country in a given period • Total income of a nation • Measure of nation’s economic well-being • Measure of a nation’s economic growth from one period to the next

  3. What’s included in GDP? • Consumption by households • Goods: groceries, clothes, iPods • Services: haircuts, oil changes

  4. What’s included in GDP? • Investment by businesses and households • Fixed assets for production • New homes • Inventories

  5. What’s included in GDP? • Government expenditures by local, state, and federal government • Roads and schools

  6. What’s included in GDP? • Net exports • Value of a country’s exports to other nations, less its imports from other nations

  7. What’s included in GDP? • GDP = Consumption + Investment + Government spending + Net exports

  8. What are the components of GDP? Exports Imports Inventories FixedInvestment Residential Nonresidential GDP Personal Consumption Expenditures (C) Investment (I) Government (G) Net Exports (NX) GDP =C+ I +G+NX

  9. What’s not included in GDP? • Intermediate goods • Used goods • Underground production (black market) • Financial transactions • Household production • Transfer payments

  10. How much of GDP is each component? Component % of GDP Average Percent of GDP since 2003 Government 19% Investment 16% Consumption (PCE) 70 % Net Exports -5% GDP 100% Source: Bureau of Economic Analysis

  11. What GDP does not tell us • Does not measure income distribution • Does not measure non-monetary output or transactions (e.g., barter, household activities) • Does not take into account desirable externalities, such as leisure or environment • Does not measure social well-being • Correlates to standard of living but is not a measure of standard of living

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