Econ Ch 6 GDP total market value of all final goods and services within a country GNP total market value of all final goods and services by factors of production owned by a country s citizens regardless of the location Concept of GDP created by Simon Kuznets National Income and Product Accounts data has been collected and published by the Bureau of Economic Analysis of Dept Commerce Tracks details of various components of national income output of US economy Expenditure approach method of calculating GDP that measures the total amount spent on all final goods during a given period G C I G X Personal Consumption Expenditures durable goods nondurable goods services Gross Private Domestic Investment Change in inventories computes the amount by which firms inventories change during a given period Inventories are goods that firms produce now but intend to sell later Income approach method of calculating GDP that measures the income wages rents interest and profits received by all factors of production in producing final goods GDP national income depreciation indirect taxes subsidies net factor payments to the rest of the world other Government consumption and gross investment G counts expenditures by federal state and local governments for final goods and services Nominal GDP is GDP measured in current dollars If you want to know how much output has changed look at real GDP Weight importance attached to an item within a group of items Base year year chose for the weights in a fixed weight procedure Fixed weight procedure uses weights from a given base year Chain weighted procedure uses geometric avg of base years which change over time as the weight When using fixed price weights to estimate real GDP problems arise because fixed price weights ignore structural changes in the economy supply shifts and substitution effect when price increases GDP deflator will suffer same questions if fixed price weight is used So chain weighted procedure is used GDP Social Welfare Society better off w less crime but not reflected in GDP More leisure more social welfare but not reflected Nonmarket household activities are not counted in GDP altho they amount to real production GDP accounting rules does not account for production that pollutes environment GDP has nothing to say about distribution of output Redistributive income policies have no direct impact on GDP GDP is neutral to the kinds of goods an economy produces Underground economy has transactions but they do not affect GDP Gross National Income used to make international comparisons of output GNP converted into dollars using average exchange rates over several years adjusted for rates of inflation Net investment gross investment depreciation
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