Unit 2: GDP and GNP

1/30/16

Gross Domestic Product (GDP) and Gross National Product (GNP)

• Gross domestic product- total value of all final goods and services produced within a country's borders.
• Gross national products- total value of all final goods and services produced by Americans in a given year
• GDP= C+Ig+G+Xn (exports-imports)

-C:(personal consumption) 67% of the economy is spent in this phase. This includes purchases of final and goods and services
-Ig: (gross private domestic investments) 18% of the economy; this includes new factory equipment, factory equipment maintenance, construction of housing, unsold inventory of products built in a year.
-G:(government spending) 18% of economy; government purchasing goods and services. Ex: School district buying school buses, Government buying weapons.
-Xn:(net exports) exports-imports; -2% of economy
 
Include in GDP        

• C
• Ig
• G
• Xn

Excluded from GDP

• Intermediate goods: Inputs used to produce final goods and services. Ex: tires, engine, windshield wiper)
• Avoid double counting and multiple counting.
• Used or second hand goods
• Stocks and bonds
• Gifts or transfer payments. Ex: Public or private scholarships, social security , unemployment, etc.
• Illegal activities. Ex: prostitution, black market
• Unreported business activity Ex: Tips
• Non market activity. Ex: volunteering, babysitting your brother)