chapter 10 - GDP Flashcards
GDP definition
market vlaue of all final goods and services produced within a given time period
dont include value of intermediate goods
what does gdp exclude
certain CURRENT output
- i) illegal activities [activities of the underground economy] like illegal gambling, drug trafficking
Because it is impossible to keep track of it
- certain non-marketed activities
value of housework performed by housewives;
do-it-yourself activities.
No similar product can be found in the market.
how are GDP and gnp linked
gnp = gdp + net factor receipts
Net Factor Receipts = Earnings by residents from abroad – Earnings by non-residents in the country
how are GDP and GNP linked
GNP = GDP + net factor receipts
net factor receipts = earnings by residents from abroad - earnings by non-residents in the country
GDPcy eqn
Pcy x Qcy
changes caused by gdp
change in price
change in qty
change in both price n qty
real gdp
real gdp = P base year x Q current year
GDP deflator
real gdp = money gdp / (gdp price deflator/100)
economic growth rate
economic growth rate = (real gdp cy - real gdp py) / real gdp py x 100%
approaches to est gdp
output
income
expenditure
output
calculates GDP by adding the values of goods and services produced by the various industries in the economy
income
by adding up all the incomes earned by all the factors of production, i.e.,
* labour - wages and salaries;
* land – rent;
* capital – interest;
* entrepreneurship – profit`
expenditure
gdp national expenditure = C+!+G+(X-M)
limitations of gdp
a) GDP is NOT a complete measure of all the country’s output of goods and services
b) GDP does NOT indicate the amount of leisure.
c) GDP does NOT adequately reflect the costs of growth.
d) GDP figure does NOT indicate the improvements in quality of goods.
e) GDP does NOT take into account how income is distributed.
f) GDP is valued/measure at current market prices.
g) GDP does NOT take into consideration population growth.
per capita gdp
pcgdp = gdp / population
