Tuesday, January 31, 2017

Unit 2: GDP & GNP 1/27/17

GDP
GDP (Gross Domestic Product): Total value of all final goods & services produced w/in a country's borders in a given year.
  • Includes all production or income earned w/in the US by US and foreign producers.
  • Excludes production outside of the US, even by Americans.

GDP Formula= C + Ig + G + Xn
C: Consumption (67%)
Ig: Gross Private Domestic Investment (18%)
  • Factor equipment maintenance
  • New factor equipment
  • Construction of housing
  • Unsold inventory of products built in a year
G: Government purchases (17%)
Xn: Net Exports (Exports-Imports) (-2%)


Included in GDP:
  • C
  • Ig
  • G
  • Xn
Excluded in GDP:
  • Intermediate goods -Avoid double or multiple counting
  • Used or secondhand- Avoid double or multiple counting
  • Stocks & Bonds- No production
  • Unreported business activity (Ex: Tips)
  • Gifts/Transfer Payments(Public/Private)- Ex: Scholarship, social security, unemployment
  • Illegal activities
  • Non-market activities- Ex: Volunteering, Babysitting



GNP

GNP (Gross National Product): Total value of all final goods & services produced by Americans in a given year.
  • Includes production or income earned by Americans anywhere in the world.
  • Excludes production by non-Americans, even in the US.

GNP Formula:
GDP + Net Foreign Factor Payment






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