Unit Two GDP, GNP and much more!

     January 27, 2015

GDP - Gross Domestic Product

   The total dollar value of all goods and services produced within a countries borders within a given year.

GNP - Gross National Product

   The total value of all final goods and services produces by Americans in a year. 

Whats included in GDP? 

C + Ig + G + Xn = GDP

C - consumption

     67 % of the economy. 

     Final goods and Services.

Ig - Gross Private Domestic Investment

  1. Factor equipment maintenance.

  2. New factory equipment.

  3. Construction of housing.

  4. Unsold inventory of products built in a year.

G - Government spending

-Military Spending.

Xn - Net export

     Exports - Imports

Whats not included in GDP?

1. Non-market activities

-Volunteering.

-Family Work.

-Selling Cannabis. 

2. Intermediate goods

-Goods and services that are purchased for resale.

-Further processing and manufacturing.

3. Used/Second hand goods.

4. Final Transaction 

-Stocks. 

-Bonds.

-Real estate. 

5. Gifts or transfer payments.

a) Private - Produce no output, simply transfer funds. from one private individual to another. EX: Scholarships.

b) Public - Recipients contribute nothing to the net production. EX: Welfare Payments and Social Security. 

Here are some examples!

1. You buy a Christmas toy at Toys-R-Us. 

     Yes counted in GDP - Because of  "C" 

2. You spend a week painting the family home (your hours of effort)  

     Not counted in GDP - Because "non- market activity

3. The Government buys 100 new helicopters for use overseas. 

     Yes counted in GDP - Because of  "G"