Chapter 5: Measuring the Economy's Output

• Gross Domestic Product:
• The total value of goods and services produced annually by a country

Goods that will be resold or that require further processing or manufacturing

Goods that will not be resold and do not require further processing or manufacturing

• 1. Income Approach
• Total income generated by the production of goods and services

• 2. Expenditures Approach
• Expenditures produced by final goods and services

GDP = C + I + G + X

• C - personal consumption expenditures
• I - gross investment
• G - government purchases
• X - net exports

• Gross National Product
• Total income that residents within a country earn in a year

• 1. Nominal GDP
• Valued at current prices
• Is not corrected for inflation
• Does not reflect the economic well being of a country

• 2. Real GDP
• Values prices according to a base year
• Is corrected for inflation
• Reflects the economic well being of a country