GDP (Gross Domestic Product)

• Total dollar value of all goods and services produced within a country's borders within a given year

GNP (Gross National Product)

• Total value of all final goods and services produced by Americans in a year

Included in GDP:

• C+Ig+G+Xn
• C-Consumption
• 67% of the economy
• Final good or service
• Ig-Gross Private Domestic Investment
• Factory Equipment Maintenance
• New Factory Equipment
• Construction of Housing
• Unsold Inventory of Products Built in a Year
• G-Government Spending
• Military Spending
• FBISD Hires New Workers etc.
• Xn-Net Exports
• Exports-Imports

Excluded from GDP:

1. Non-market Activities
• Volunteering
• Family Work
• Illegal drugs
2. Intermediate Goods
• Goods and services that are purchased for resale or for further processing and manufacturing
• Anything that goes into making a product
• Avoid multiple or double counting
3. Used or Secondhand Goods
• Clothing from a thrift shop
4. Financial Transactions
• Stocks
• Bonds
• Real Estate
5. Gifts or Transfer Payments
• Public
• Public transfer payments
• Recipients contribute nothing to the current production
• Welfare payments or social security
• Taxes paid by individuals are given to the public
  
  
  
• Private
• Private transfer payments produce no output
• Simply transfer funds from one private individual to another
• Ex: Scholarship

FORMULAS!! 😀😀😀

• C+Ig+G+Xn=GDP

• Budget= Government Purchases of Goods and Services + Government Transfer Payments - Government Tax and Fee Collection
  (If Number is Positive, It is a deficit. If Number is negative, it is a surplus)
• Trade= Exports-Imports
• GNP=GDP+Net Foreign Factor Payments
• NNP(Net National Product)= GNP-Depreciation
• NDP(Net Domestic Product) = GDP - Depreciation
• National Income =
• GDP-Indirect Business Taxes - Depreciation - Net Foreign Factor Payments
• Compensation of Employees + Rental Income + Interest Income + Proprietor’s Income + Corporate Profits
• Disposable Personal Income = National Income - Personal Household Taxes + Government Transfer Payments

Nominal GDP

• Value of output produced in current prices
• Price x Quantity = Nominal GDP
• Can increase from year to year if either output or price increase

Real GDP

• Value of output produced in constant or base year prices
• Price x Quantity = Real GDP
• Can increase from year to year only if output increases
• Output is measured by quantity
• Reason why real GDP reflects base year price is because it accounts for inflation
  
  
  
  

  Price Index

  • Measures inflation by tracking changes in the price in the market basket of goods compared with the base year
  • (Price of market basket of goods in current year)/(Price of market of goods in base year) x 100 = Price Index

  GDP Deflator

  • Price index used to adjust from nominal to real GDP
  • In the base year, GDP deflator will equal 100
  • For years after the base year, the GDP deflator is greater than 100
  • For years before the base year, the GDP deflator is less than 100
  • (Nominal GDP)/(Real GDP) x 100 = GDP Deflator

  Calculate Inflation

  
  

  • ((New GDP Deflator) - (Old GDP Deflator)) / (Old GDP Deflator) x 100