Chapter 5: Measuring the Economy's Output
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- Gross Domestic Product:
- The total value of goods and services produced annually by a country
Define Intermediate Goods
Goods that will be resold or that require further processing or manufacturing
Define Final Goods
Goods that will not be resold and do not require further processing or manufacturing
What are the two ways of measuring GDP?
- 1. Income Approach
- Total income generated by the production of goods and services
- 2. Expenditures Approach
- Expenditures produced by final goods and services
What is the formula for the expenditures approach?
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
What are the two types of GDP?
- 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
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