GDP - -1- GROSS DOMESTIC PRODUCT (GDP) GDP It is the total...

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- 1 - GROSS DOMESTIC PRODUCT (GDP) GDP It is the total value of all the final goods and services produce by the citizens of a country during a given period of time, usually a year. Final Goods and Services We are referring to only those goods and services that consumers, businesses and governments purchase for their own use. E.g. telephone, answering machines, etc. not intermediate goods. THE FORMULA GDP + incomes from abroad = GNP – Depreciation = NNP – indirect business taxes = NI - all incomes earned, but not received + all incomes received, but not earned = PI – direct tax = DI GDP Gross Domestic Product Incomes from abroad Includes income from Americans living outside the US, e.g. army, navy, Air Force service men and women and incomes from American workers of multi national corporations stationed outside the US. minus all incomes of foreigners (non-Americans) working in the US, who happen to send those incomes back to their respective countries. GNP Gross National Product Depreciation Machinery, equipment and building (plant and equipment) that have worn out or become obsolete over the course of the year. Money set aside to replace the old one. NNP Net National Product Indirect business taxes
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- 2 - NI National Income All income earned Taxes But not received 1) Voluntary union dues and H.C.I 2) Involuntary direct tax, personal tax All income received Money without doing anything, e.g. But not earned unemployment benefits, AFDC, SSI and pensions PI Personal Income Direct taxes DI Deposal income CALCULATION OF GDP Expenditures Approach Households + business + government + foreigners The total expenditures = households + business + government + foreigner Households Expenditures Consumption (C) consumption (C) Business Expenditures Investments (I) Investments (I) Government Expenditures Government Expenditures (G) Foreign Expenditures Net export (X n ) Net Export is obtained buy subtracting all the money we spend on foreign goods
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This note was uploaded on 01/28/2011 for the course ECON 1 taught by Professor Sm during the Spring '10 term at Laney College.

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GDP - -1- GROSS DOMESTIC PRODUCT (GDP) GDP It is the total...

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