Chapter 5 - Chapter 5 Gross Domestic Output(GDP A nations...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Gross Domestic Output (GDP): A nation’s gross domestic product (GDP) is the total value of all final goods and services produced for the marketplace during a given period within the nation’s borders. Using dollar values has two important advantages. 1. It gives us a common unite of measurement for every different things 2. It ensures that a good that uses more resources to produce will count more in GDP that a good that uses fewer resources. Problems: 1. If prices rise, then GDP will rise, even if we are not actually producing more 2. Cant track the change in output over time 3. The value of the dollar – the purchasing power – is itself changing GDP must be adjusted to take away the effects of inflation Intermediate goods - Goods used up in the process of producing something else Final goods - A product sold to its final user To avoid overcounting intermediate products when measuring GDP, we add up the value of final goods and services only. The value of all intermediate products is automatically included in the value of the final products they used to create GDP counts only things that are produced. Does not count: land, stocks, bonds GDP does not include all final goods and services produced in the economy. It includes only the ones produced for the marketplace, with the intention of being sold Second hand goods are not counted in GDP Expenditure approach: GDP = C + I + G + NX - Consumption goods and services (C), purchased by households - Making up about 70% of total production -
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern