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Gross Domestic Product (GDP)

Gross Domestic Product (GDP). Dollar amount of all final goods and services produced within a country’s national borders in a year. Does not count intermediate goods Includes wages Reliable estimates, not exact Reported quarterly. GDP Analysis.

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Gross Domestic Product (GDP)

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  1. Gross Domestic Product (GDP) • Dollar amount of all final goods and services produced within a country’s national borders in a year. • Does not count intermediate goods • Includes wages • Reliable estimates, not exact • Reported quarterly

  2. GDP Analysis • Increase seen as good to fill needs and wants of the people • Seen as the single most important economic statistic

  3. Current GDP • $12.5 Trillion

  4. Measuring the US Income • Gross National Product • Dollar value of all final goods, services and structures produced in one year with labor and property supplied by US residents, regardless of where it takes place.

  5. Measuring the US Income • Net National Product • GNP minus capital consumption allowances • Depreciation and other deterioration of the capital stock that takes place as result of production.

  6. Measuring the US Income • National Income (NI) • Net national product minus all taxes except corporate profit taxes.

  7. Measuring the US Income • Personal Income (PI) • The total amount of income going to consumers before individual income taxes are subtracted

  8. Measuring the US Income • Disposable Income (DI) • The total amount of income the consumer sector has at its disposal after individual income taxes.

  9. Economic Sectors • (C) consumer- household • (I) investment- business • (G) government- public • (Xn) foreign- all outside US

  10. Output-Expenditure Model • GDP= C+I+G+Xn

  11. Price Index • Compensates GDP for inflation • Market Basket • representative goods purchased over time to check inflation.

  12. Major Price Indices • Consumer Price Index (CPI) • measures price changes of goods from month to month.

  13. Major Price Indices • Producer Price Index (PPI) • measures price changes by domestic producers from month to month.

  14. Major Price Indices • Implicit GDP Price Deflator • removes effects from inflation from GDP

  15. Adjusted for inflation Not adjusted for inflation GDP Real vs. Current

  16. GDP Gap • Difference between the actual GDP and the potential GDP that could be produced if all resources were fully employed.

  17. Aggregate Demand Curve • Summary of the demand of all economic units in the economy • Graph showing the quantity of real GDP that would be purchased at each possible price level in the economy

  18. Aggregate Supply Curve • The real level of GDP that could be produced at various prices

  19. Equilibrium • Macroeconomic equilibrium • Intersection of the Aggregate supply and demand curves • The level of real GDP consistent with a given price level

  20. Demand-Side Economics • Stimulate consumption of goods and services (demand) • Cut taxes or increase federal spending for people in general • With more money, people will buy more • Business increases output

  21. Demand-Side Economics • Keynesian Framework • GDP=C+I+G+Xn • Changes in (I) investors unstable • Up to G government to step in

  22. Supply-Side Economics • Stimulate production (supply) • Cut taxes- increase incentives for business • Business expands, hires workers

  23. Stagflation • Stagnant growth • High unemployment • Inflation

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