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WEEK 1- CH4: GDP - Coggle Diagram
WEEK 1- CH4: GDP
LO#1: Measuring Total Production in an Economy
Definition: GDP is the market value of all final G&S in a country during a period of time
measured using market value (not quantities)
includes on the market value of final goods
includes only current production
ABS uses 3 methods of calculating GDP
The Production method
The expenditure method
The Income Method
Compoents of GDP
Consumption (C)
Gurable goods
Services
Non-Durable goods
Investment (I)
Business Investment
Residential Investment
Changes in Business inventories
Government Purchases (G)
Federal, state & local
Net Exports (NX)
Exports (X) minus imports (M)
Y= C + I + G + NX
LO#3: Real GDP, Economic Growth and the Deflator
Calculating Real GDP
Nominal GDP VS Real GDP
Nominal GDP: the market value of final G&S's evaluated at current year prices
Real GDP: measures of volume of final G&S's holding prices constant
Formula
Quantity (Q) X Price at base year (P)
Economic Growth Rate
Formula
[(Real GDP_t - Real GDP_t-1)/Real GDP_t-1] X 100
The GDP Deflator
Formula
(Nominal GDP/Real GDP) X 100
LO#2: Is GDP a good measure of economic wellbeing
Shortcomings of GDP
Total Production
Does not include Household Production
Does not include underground economy (black market)
Wellbeing
Does not include
distribution
leisure
level & quality health care & education
pollution
crime & other social problems