1. GDP GROSS DOMESTIC PRODUCT

2. MEASURE OF ECONOMIC OUTPUT Macro keeps track of production, consumption, saving, investment, & income GDP is used to track national output

3. MEASURING CURRENT GDP To calculate GDP multiply goods & services by prices, then add to get total dollar value Government statisticians use sampling to estimate quantities & prices GDP estimated quarterly, revised for months after Takes several months to discover how economy is performing

4. SOME THINGS ARE EXCLUDED Intermediate products excluded because GDP only measures final output Secondhand sales excluded from GDP because no new production is involved Nonmarket transactions excluded from GDP Transactions in underground economy not counted in GDP

5. CURRENT GDP V. REAL GDP GDP can appear to increase when prices increase To account for this GDP must be adjusted for inflation Economists use set of constant prices from a base year This is called Real GDP – GDP measured using constant base year prices GDP, nominal GDP, & current GDP calculated using current prices

6. GDP PER CAPITA Real GDP per Capita adjusts GDP based on size of the population Can show us how a country is growing over time, or how total annual output of one country compares to another

7. WHAT GDP DOES NOT TELL US Composition of Output – Nothing about types of products produced Quality of Life Impacts – Increased production may negatively impact quality of life Nonmarket Activities – Does not count work around the house, so GDP underestimates total amount of productive activities Improved Product Quality – GDP not designed to track changes in product quality