(1-28-16) Unit II Gross Domestic Product

Gross Domestic Product (GDP)

GDP-The total market value of all final goods and services produced in a countries borders within a given year

Gross National Product (GNP)- The total market value of all final goods and services by citizens of that country on its land or foreign land.

Included in GDP

C (65%) -Personal Consumption expenditures

Ig (17%) -Gross Private Domestic Investment:(1.Factory equipment maintenance, 2.Factory Equipment, 3. Construction of houses, 4.Unsold inventory of products built in a year.)

G (20%) - Government Spending

Xn (-2%) - Net Exports (exports - imports)

Formula-

C+Ig+G+Xn(Ex-Im)

What is not included in GDP

1. Intermediate goods-Goods that require further processing before it is ready for final use (chips[computer])

2. Used/Secondhand good(s)- Avoids double counting

3. Purely Financial Transactions - (Stocks and Bonds)

4. Illegal Activity- (Drugs)

5. Unreported business activity-(Unreported tips)

6.Transfer Payments- Public (Social Security,VA, welfare) Private (Scholarships)

7.Non-Market Activity-Volunteering, babysitting, any work that you preform for yourself

Formulas (cont.)-

Budget- government purchases of goods and services + government transfer payments - government tax and fee collection 

+ - Deficit - = Surplus

Trade- Ex - Im + - Surplus - = Deficit

National Income-1. compensation of employees + rental income + interest income + corporate profits + proprietors income 2. GDP - indirect business taxes - depreciation - net foreign factor payment

Disposable Personal Income- national income - personal household taxes + government transfer payments