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

GDP - most important measure of growth.

- Production within that year
- National Income Accounting - statistics that Economists collect on production, income, investment, and savings
- gross = total before adding taxes

GDP : 

• Total dollar value of all final goods and services produced within a country's borders within a given year
• What is not included in GDP?
• Intermediate goods
• no multiple counting
• only counts for final goods
• Secondhand or Used Goods
• if bought from someone else
• already counted for the year it was made
• Non-market Activity
• illegal drugs
• babysitting
• volunteering
• unpaid position, doesn't count
• Financial Transaction
• stocks
• bonds
• real estate
• Gifts or Transfer Papers
• social security
• scholarships
• What is included in GDP?
• C - Consumption
• 67% of economy
• all finished goods and services
• Ig - Gross Private Domestic Investment
• new factory equipment
• new housing
• new factory equipment maintenance
• unsold inventory of production built in a year
• G - Government Spending
• government purchase of goods and services
• Xn - Net Exports
• Exports - Imports (minus)
• Expenditure Approach -
• C + Ig +G + Xn =GDP
• add up market value of all domestic expenditures made on final goods and services in a single year
• what is bought or sold

Proof of GDP is found in receipts, GDP is more reliable than GNP.

Gross National Product (GNP) :

• total value of all final goods and services by citizens of that country on its land or on foreign land
• ex: Nike's, made by foreigners and sold somewhere else
• Income Approach -
• GDP = W + R + I + P + Statistical Adjustments
• W = wages
• compensation of employees, salary supplements
• ex: pension (retirement), health, insurance, welfare)
• R = rents
1. tenents to landlord
2. lease payment by a corporation for use of space
• I = interest
• money paid by private businesses to the suppliers of loans used to purchase capital
• P = profits, corporation profit
1. Corporation income taxes could show up as dividends, or undistributed corporation profits
• add up all of the income earned by households and firms in a single year
• this is what you report
• is based on what you say
• not reliable