Unit 2: Calculating Net Products and GNP

2/1/17

Calculating Net Products

• Net domestic product: (GDP-Depreciation)
• Ne national products: (GNP-Net foreign factor)
• GNP: (GDP+ Net foreign factor payment)

- Depreciation:  The loss to value due to the " wear and tear" of capital equipment ,also known as consumption of fixed capital.

2/2/17

Gross Investment

• Gross investment= (Net Investment+ Depreciation)

2/3/17

• Nominal GDP- Value of output produced in current prices.

* Can increase from year to year if the output or price increases

• Real GDP- Value of output produced in constant based year prices. 

*Adjust for inflation , only increases when output increases.

• Nominal GDP: Current year PxQ

- In the base year real GDP and nominal GDP are equal
-In years after the base year nominal GDP will exceed real GDP
-In years before the base year real GDP will exceed the nominal GDP