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Micah Thacker

Gross Domestic Product (GDP)

Second-hand transaction
Transfer payments

Stock Market Transactions

Nonmarket Transactions

Underground Economics

Final goods
Intermediate goods

How GDP is computed



Government Spending
Net Exports

Market value of all final goods and services

produced annually in a country
- It tells how well an economy is doing
- GDP only measures value by dollars
- No included since they are previously bought
- Not included
- Government payment to people no in
exchange for goods/services
o Welfare, SS, veteran benefits, etc
- Not included because theyre non productive
and made only for people entitled to them
- Not new production
- Only the exchange of certificate of ownership
and indebtedness
- Only market transactions are included
- Excludes homemakers, child watching, or DIYs
- If you take clothes to cleaners: yes, but if
clothes are washed at home: no
- Not included
- Illegal transactions arent recorded
- Side jobs for neighbors or friends are not
included either
- Goods/services sold to final user
- Goods/services used as inputs for production
of final goods
- EX 1:
o Selling glass wholesale to automaker is
not included because the intermediate
good is used in production of car. The
car value is the final good counted
- EX 2:
o Wholesale glass to hardware store is
not included until final purchase, when
customer bugs glass to fix windows.
C + I + G + (X-M) =GDP
- Total household spending for durable goods(3+
years) and non-durable goods (-3years)
- Spending for services is larger than durable and
non-durable (medical, recreation, education)
o What makes it a service economy
- Capital assets: plants, equipment, tools,
computers, and products produced and held in
- Purchases by government @ federal, state, and
local level
- X = foreigners spending for US goods

Micah Thacker
Nominal GDP
Real GDP
GDP per Capita

Circle Flow Chart

M = $ amounts of US purchases form

+X = money is flowing from exports
-M = dollars are flowing out of US for imports
-X = US is spending more money for imports
more than its making from exports
GDP measure in current prices
Ex: ticket prices and sales in 2010 vs. 1939
GDP adjusted for changes in prices over time
Ex: base price from 2005
Is GDP divided by total population
Can be argued that it only measures income
and the quality of life.
Shows exchange of money, products,
resources, between businesses, households,
and government.

This section entails inform about GDP and its major connection to the measure of economy spending.
We learn what contributes to the GDP , what hurts the GDP, what is not included, and how to compute
it. It also shows the circular busines