Unit 2 notes: 01/28/16

Gross Domestic Product

GDP (gross domestic product)- total market value of all final goods and services produced within a country's borders in a given year.

GNP (gross national product)- total market value of all final goods and services by citizens of that country on its land or foreign land. 

What's included in GDP?

C: Personal Consumption Expenditures (65%)

      Examples: 

• commission
• wants and needs
• tuition  

Ig: Gross Private Domestic Investment (17%)

      Examples: 

1. Factory equipment maintenance 
2. New factory equipment
3. Construction of housing
4. Unsold inventory of products built in a year

G: Government Spending (20%)

      Example: 

• hiring

Xn: Net Exports (-2%) 

Brought in from somewhere else and sold in America

To calculate:  Net exports- imports

What's not included in GDP?

1. Intermediate Goods- Goods that require further processing before they are ready for final use. Examples: cars, backpacks, cellphones
2. Used/ second hand goods- avoid double counting Examples: pre-owned car, thrift store
3. Purely Financial Transactions- Does not involve the production of a good or service; merely a transfer of assets ( not durable)
4. Illegal Activity-drugs
5. Unreported Business Activities- unreported tips 
6. Transfer Payments- money from government.                                                                              -Public (social security, VA, welfare) -private (scholarships, parent to child)
7. Non-market Activity- volunteering, babysitting, performing work for oneself                    (mow lawn, fix your gate, plumbing, wages, income, borrowing, trading)