# Gross Domestic Product

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28 Οκτ 2013 (πριν από 4 χρόνια και 8 μήνες)

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Intro to Macroeconomics Day 2:
Gross Domestic Product

The Big Picture

Chapter 9 (p 197
-

202)

Review: Macroeconomics

the study of the economy as a whole

the behaviour of ALL the markets that make
up the economy of a particular country

Measuring Performance

problem

in macroeconomics:

How can you measure the performance of an entire
economy?

Looking at the performance of many markets all at the
same time

Unemployment rate (last day)

Gross Domestic Product (today)

Gross Domestic Product

The total market value of all goods and
services produced in a country in one year

GDP is calculated for a specific country

th

overall)

\$1,395,374,000,000

USA GDP for 2011 (1
st

overall)

\$15,075,675,000,000

*according
to
International Monetary
Fund

Calculating GDP

Expenditure method

Add up the total money spent on all goods and
services in one year

Income method

Add up all the income earned by workers producing
goods and services in one year

These two measures SHOULD be the same for a given
economy. Why?

Calculating
GDP: Formula
for Expenditure Method

GDP = C + G + I + (X

M)

C

household consumption, money spent of goods and services by
individuals and families

G

government spending (healthcare, education, roads, wages
etc.)

I

Investment, spending to increase future production (factories,
machines etc.)

X

Exports, products built in Canada, but sold in other countries

M

Imports, products built in other countries but sold within

Prices Affect GDP

If prices for goods/services increase over a year,
the GDP will appear to increase as well

Not an accurate measure of the economy;
country is not actually producing more

Use “
REAL GDP
“constant dollars”

Adjusted for short term increases/decreases in price

Measuring an Economy

Economic growth (amount an economy expands in a
given year) is measured by comparing real GDP over
two years

\$
1,587,558 (millions)

\$
1,628,295 (millions)

Growth =
real GDP 2011

real GDP 2010

real GDP 2010

Growth =
1,628,295

1,587,558

=
2.6% growth

1,587,558

Usefulness
of GDP?

GDP is often used to measure the
prosperity/standard of living for different countries
around the world

Is this fair?

Divide GDP by population to get
GDP per capita

Average income for each person in that country

Higher GDP per capita should indicate higher
standard of living