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Understanding Economic Growth through GDP: Key Components and Measurements

This unit explores the concept of economic growth, focusing on GDP (Gross Domestic Product) as a vital indicator. GDP represents the market value of all final goods and services produced within an economy over a year. It differentiates between nominal GDP (current dollars) and real GDP (adjusted for inflation) for accurate comparisons over time. The unit also outlines the four main categories contributing to GDP: consumption, investment, government spending, and net exports, encapsulated in the formula C + I + G + (X - M) = GDP.

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Understanding Economic Growth through GDP: Key Components and Measurements

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  1. Unit 2: Macroeconomics

  2. I. Macroeconomics A. Three Economic Goals 1. Economic Growth a. GDP (Gross Domestic Product) (3-4%) i. the market value of all final goods and services produced in an economy in one year ii. final goods/services that have been purchased for final use, not for resale or further manufacture

  3. - cheeseburger, not the patty iii. Nominal GDP - output in current dollars iv. Read GDP - adjusted for inflation - better measurement for comparing output over time v. Four categories of goods/services - consumption (c) – spending by households (70% of GDP) - government (g) – spending by all levels of government

  4. - net exports (x-m) – spending by people abroad on U.S. goods and services (exports are x) minus spending by people in the U.S. on foreign goods and services (imports are m). - investment (i) – spending by businesses on machinery, factories, tools, and construction vi. C+I+G+ (X-M) = GDP

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