GDP

Examples of GDP in the following topics:

• The GDP Deflator

  • The GDP deflator is a price index that measures inflation or deflation in an economy by calculating a ratio of nominal GDP to real GDP.
  • In other words, real GDP is nominal GDP adjusted for inflation.
  • The GDP deflator is calculated by dividing nominal GDP by real GDP and multiplying by 100 .
  • Consider a numeric example: if nominal GDP is $100,000, and real GDP is $45,000, then the GDP deflator will be 222 (GDP deflator = $100,000/$45,000 * 100 = 222.22).
  • In the U.S., GDP and GDP deflator are calculated by the U.S.

• Calculating Real GDP

  • Real GDP growth is the value of all goods produced in a given year; nominal GDP is value of all the goods taking price changes into account.
  • Imagine a country with a GDP of $100 in a given year.
  • The GDP is the officially recognized totals.
  • $GDP = C + I + G + (X - M)$
  • Real GDP, therefore, accounts for the fact that if prices change but output doesn't, nominal GDP would change.

• GDP per capita

  • Gross domestic product (GDP) per capita is also known as income per person.
  • GDP per capita is calculated by dividing GDP by the total population of the country.
  • It is useful because GDP is expected to increase with population, so it may be misleading to simply compare the GDPs of two countries.
  • GDP per capita accounts for population size.
  • Define GDP per capita and assess its usefulness as a metric.

• Calculating GDP

  • GDP can be calculated through the expenditures, income, or output approach.
  • The sum of net value added in various economic activities is known as GDP at factor cost.
  • GDP at factor cost plus indirect taxes less subsidies on products is GDP at producer price.
  • GDP at producer price theoretically should be equal to GDP calculated based on the expenditure approach.
  • GDP is a common measure for both inter-country comparisons and intra-country comparisons.

• Evaluating GDP as a Measure of the Economy

  • The value of GDP as a measure of the quality of life for a given country may be limited.
  • Therefore, growth could be misinterpreted by looking at GDP values in isolation.
  • The sensitivities related to social welfare has continued the argument specific to the use of GDP as a economic growth or progress metric.
  • Although GDP provides a single quantitative metric by which comparisons can be made across countries, the aggregation of elements that create the single value of GDP provide limitations in evaluating a country and its economic agents.
  • Assess the uses and limitations of GDP as a measure of the economy

• Other Approaches to Calculating GDP

  • The income approach evaluates GDP from the perspective of the final income to economic participants.
  • GDP calculated in this manner is sometimes referenced as "Gross Domestic Income" (GDI).
  • GDP = COE + GOS + GMI + TP & M – SP & M
  • It measures the value of GDP at factor (basic) prices.
  • So, adding taxes less subsidies on production and imports converts GDP at factor cost (as noted, a net domestic product) to GDP.

• Gross Domestic Product

  • GDP only refers to goods produced within a particular country.
  • GDP.
  • Components of GDP by expenditure are:
  • Another way of measuring GDP is to measure total income.
  • Two adjustments must then be made to get GDP:

• Defining GDP

  • GDP can be determined in multiple ways.
  • The income approach and the expenditure approach highlighted below should yield the same final GDP number .
  • Y = C + I + G + (X − M) is the standard equational (expenditure) representation of GDP.
  • "Investment" in GDP does not mean purchases of financial products.
  • Two non-income adjustments are made to the sum of these categories to arrive at GDP:

• Defining Aggregate Expenditure: Components and Comparison to GDP

  • The GDP is calculated using the Aggregate Expenditures Model .
  • In contrast, when there is an excess of expenditure over supply, there is excess demand which leads to an increase in prices or output (higher GDP).
  • A rise in the aggregate expenditure pushes the economy towards a higher equilibrium and a higher potential of the GDP.
  • It is used to determine and graph the real GPD, potential GDP, and point of equilibrium.
  • A shift in supply or demand impacts the GDP.

• GDP Equation in Depth (C+I+G+X)

  • GDP is the sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M): Y = C + I + G + (X - M).
  • GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M):
  • Also, it is important to note that goods such as hand-knit sweaters are not counted as part of GDP if they are gifted and not sold.
  • In contrast to common usage, 'Investment' in GDP does not mean purchases of financial products.
  • Components of the expenditure approach to calculating GDP as presented in the National Income Accounts (U.S.