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EC102-5SPRING09b - 51 Chapter 5 Measuring a Nation's Income...

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5-1 Chapter 5:  Measuring a Nation’s Income Gross Domestic Product – GDP GDP is the market value of all final goods and services produced (and income earned) within a country during a period of one year
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5-2 o GDP is basically a production concept o GDP is a flow variable A variable with a time dimension (such as one year) o Market Value
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5-3 Example: Item Price Quantity CDs $15 1000 Tapes $5 2000 Current GDP: $15*1000 + $5*2000 = $25,000 Nominal GDP (current dollar GDP) Final Goods: Goods that are ready to be used by the end user Intermediate goods Inputs into the production Not included in GDP because to include them would mean double-counting o In the national accounts, firms and the government  are the units which produce output in the domestic  economy o Final and intermediate goods and services
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5-4 Items not included in GDP: o Used or second hand goods o Non-marketed goods and services Underground economy o Financial assets 
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5-5 How Do We Actually Measure GDP?  Three Methods: o Value-added (production) Approach  o Expenditure Approach
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5-6 o Income Approach
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5-7 Value-Added Example Stage of  Production Value of  sales Cost of  intermediate  products
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