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1
Chap 10, Mankiw – Measurement of national income
•
Introduction and definition of the GDP
•
Gross domestic product – meaning of the term
•
Circular flow diagram and the methods of calculating GDP
•
Other measures of national income
•
Quality of life and GDP
 
2
I.Introduction and definition of the GDP
Several definition of national income are possible. We shalluse the
GDP
defintion.
GDP
definition =market value of all final goods and services   produced within a country in a given period of time.
2 ways of measuring GDP
:the expenditure methodthe income methodThe equivalence of the 2 methods can be shown by the
circular flow diagram.
The diagram implies that
 for theeconomy as a whole, income must equal expenditure
.
 
3
II. GDP – 
what is included and what is not
GDP
=market value of all final goods and services  produced within a country in a given period of time. market value:market prices are used to evaluate goods because theyreflect the value to the buyers and the cost to the sellers at the sametime;only marketed goods are included although we also benefit from non-marketed goods: ex:final goods and servicesnot intermediate goods are included; ex: produced:only goods produced in the current year are included notgoods which are resold: ex:within a country:“domestic” production not “national” productionin a given period of time:an accounting period
of 00

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