2. Gross Domestic Product GDP
The total dollar value of
all final GOODS and SERVICES produced in a country in a year.

3. Types of GDP Current Dollar (Nominal) GDP
Gives us the current size of our economy
Real GDP – adjusted for inflation
Used to calculate growth rates
Percentage change
real growth over time
Per Capita GDP – per person
One person’s share
GDP – PPP Purchasing Power Parity
Adjustment for price differences in different countries

4. Monetary Measure
Dollar value is only way to compare the value of items in our society.
Price is a measure of society’s valuation.
Price may not reflect individual’s valuation.

5. Measure Final Sales Only
Avoid double counting
Example – wool suit $200.00
Production stage Sales value Value Added
Sheep Ranch $ $50.00
Wool Processor $ $25.00
Suit Maker $ $25.00
Wholesaler $ $40.00
Retailer $ $60.00
TOTAL $ $200.00

6. Non-Productive Transactions are not counted . . .
Public and Private Transfer Payments
Welfare, Social Security, Unemployment
Charity – Red Cross, Salvation Army
Purely Financial Transactions
Stock, Bond, Investment Trades
Brokers fees are part of GDP
Secondhand Sales
Was part of GDP in previous year
Used cars, thrift sales, etc.

7. Non – Market Production
Not counted
Difficult to measure
Would count if done in market
Do- it - yourselfers
Housework
Volunteers
Barter activities

8. GDP Expenditure Approach
GDP = C + Ig + G + (EX – IM)
C = Personal Consumption
Ig = Gross Private Domestic Investment
G = Government Purchases of Goods & Services
(EX – IM) = Net Exports
EX = Exports
IM = Imports

9. C = Personal Consumption
Largest of the accounts 2/3 of GDP
All consumer spending
Durable goods
Non-durable goods
Services

10. Ig = Gross Private Domestic Investment
Purchases of machinery, equipment, tools by businesses
All construction – including housing
All changes in inventory

11. G = Government purchases
All levels – Federal, State, Local
Does not include transfer payments
Figured at cost, not market value

12. Net Exports (EX – IM) Add Exports (EX) Subtract Imports (IM)
Spending on goods & services by foreigners
Subtract Imports (IM)
Personal Consumption on goods & services produced in a foreign country

13. GDP doesn’t measure Social Welfare Bads & Disservices
Drug trade
Prostitution
Gambling
Add 15% ? (estimates 5% – 25%)

14. GDP numbers 2011:III annual rate (billions $)
Account Current Dollars
GDP $15,198
C $10,803
Ig $ 1,918
G $ 3,050
(EX - IM) $
EX $ 2,117
IM $ 2,690
Per Capita GDP $48,633

15. Real GDP Annual % Changes
% %
% %
% %
% %
% %
% %
% %
% %
% % %

18. Country & GDP (in billions) 2010 est World Bank
USA $14,582 #1
China $ 5,878 #2
Will take 18 years for China to pass U.S. if U.S grows 3% China grows at 9%
Japan $ 5,497 #3
Germany $ 3,309 #4
France $ 2,560 #5
U. K. $ 2,246 #6
Brazil $ 2,087 #7
Italy $ 2,051 #8
India $ 1,729 #9
Canada $ 1,574 #10
Russia $ 1,476 #11
Spain $ 1,407 #12
Mexico $ 1,039 #13

19. Country & GDP (PPP) (in billions) 2010 est CIA World Factbook
USA $14,660 #1
China $10,090 #2
Japan $ 4,310 #3
India $ 4,060 #4
Germany $ 2,940 #5
Russia $ 2,223 #6
Mexico $ 1,567 #11
Canada $ 1,330 #14
Poland $ #20
UAE $ #50
Turkmenistan $ #100
Monaco $ #200
Tokelau $ #226

20. Country GDP Per Capita 1 Monaco $172,676 2 Liechtenstein $134,915
3 Luxembourg $106,252
4 Bermuda $ 88,747
5 Norway $ 78,409
11 United States $ 45,745
20 France $ 40,663
50 Saudi Arabia $ 13,901
75 Maylasia $ 6,909
100 Angola $ 4,069
105 China $ 3,749
190 Burundi $