Measuring Total Production and Income: Gross Domestic Product (GDP) - Prof. James Robert G, Study notes of Economics

Download Measuring Total Production and Income: Gross Domestic Product (GDP) - Prof. James Robert G and more Study notes Economics in PDF only on Docsity! Ch. 8 GDP: Measuring Total Production & Income Gross Domestic Product (GDP) ° value of all goods & services produced in a country during a year. ° Total ¢ Problem 1.10, p. 263 Total Production = Total ¢ Everything a firm receives from the sale of its output is paid out as to the of the factors of production. ¢ Apple iPod example ¢ GDP = Total =Total Components of GDP Four Major Categories of Expenditures GDP = C + I + G + NX • Consumption (C):  ________ __ __________ on goods & services, not including spending on new  houses.  _____ GDP in 2010  (China C only 36%) • ‐‐Services (e.g., medical care, education, & haircuts) _______ than sum of spending on durable & nondurables  goods • ‐‐Nondurable goods (e.g., food & clothing) • ‐‐Durable goods (e.g., automobiles & furniture)  life span > 3 years • FRED – Which dropped the most during the recession? Components of GDP Four Major Categories of Expenditures GDP = C + I + G + NX • Investment (I): ________ __ _____ on new  factories, office building, machinery, & additions to  inventories, plus spending by households & by firms  on new houses.  _____ GDP in 2010 • ‐‐Business fixed investment (new factories, office buildings, &  machinery) • ‐‐Residential investment (single‐family & multi‐family houses) • ‐‐Changes in business inventories • FRED – Look at the housing crisis! Two Types of Production  Not Included in GDP • ________ ________ Goods & services people produce for themselves • ___________ _________ Buying & selling of goods & services that is concealed  from the government or because the goods & services  are illegal • ‐‐Largest cash crop in Kentucky? GDP Not a Perfect Measure of Well-Being Value of leisure not included in GDP GDP not adjusted for pollution & other negative effects of production Not adjusted for changes in crime & other social problems Measures size of pie, not how divided To Win Read Chapter 8 with these slides as a guide to complete understanding. Work MyEconLab Ch. 8 Study Plan Questions Major Points Next Time