Why is GDP a useful measure? Measure of economy’s health “mother of all economic indicators” Economic growth
How is GDP an imperfect measure? Consider what is not counted Volunteer work improvements in efficiency qualitative changes (not just quantitative) Underground economy Standard of living? Inflation Population Distribution of wealth
Factors Limiting Types of Products Counted One year Only final goods and services Not intermediate Only goods sold for first time
Adjusting Gross Domestic Product Current GDP Money GDP Deflate with CPI Why?
Real GDP Constant Dollars Base Year Why?