Tuesday, February 9, 2016

Unit 2- Gross Domestic Product

Gross Domestic Product (GDP)
Definition: The total market value of goods and services that is produced within a country's borders in a given year .

Gross National Product (GNP)
Definition:the total market value of all the final goods and services by citizens of that country on it's land or foreign land.

Included in GDP:

  1. Personal Consumption Expenditures C - (65%)
  2. Gross Private Domestic Investment IG - (17%)
    • New factory equipment 
    • Factory equipment maintenance
    • Construction of housing
    • Unsold inventory of products built in a year
  3. Government Spending G - (20%)
  4. Net Exports (Exports-Imports) Xn - (-2%)
Not Included in GDP:
  1. Intermediate Goods - Goods that require further processing before they are ready for final use.    Ex: Steering wheel, engine, windows.
  2. Used or Secondhand Goods 
  3. Purely Financial Transaction - Does not involve a good or service.                                           Ex: Stocks and Bonds.
  4. Illegal Activities                                                                                                                                      Ex: Drugs
  5. Unreported Business Activities                                                                                                  Ex:Unreported tips
  6. Transfer Payments                                                                                                                                Ex: Public- Social, Welfare                                                                                                                   Private- Scholarships
  7. Non-Market Activity                                                                                                                          Ex: Volunteering, Babysitting, Trading, and Any work that you do for yourself.


Posted by at

2 comments:

  1. UnknownFebruary 10, 2016 at 9:22 AM

    This comment has been removed by the author.

    ReplyDelete
  2. UnknownFebruary 10, 2016 at 9:26 AM

    Used as a benchmark growth indicator in the ever changing economy, GDP is essential for businesses as they do their growth planning. An interesting fact in relation GDP, the U.S. has the highest contribution to the service sector and makes about 22% of the world economy.

    ReplyDelete

Subscribe to: Post Comments (Atom)