Chap1gdp.pptx | Course Paper

Principles of Economics

Global Edition

Chapter 21

Measuring National Output and

National Income

Chapter Outline and Learning

Objectives

21.1 Gross Domestic Product

•Describe GDP fundamentals and differentiate between GDP

and GNP.

21.2 Calculating GDP

•Explain two methods for calculating GDP.

21.3 Nominal versus Real GDP

•Discuss the difference between real GDP and nominal GDP.

20.3 Limitations of the GDP Concept

•Discuss the limitations of using GDP to measure well-being.

Looking Ahead

Measuring National Output and

National Income

•national income and product accounts Data collected

and published by the government describing the various

components of national income and output in the economy.

•Data are complied by the Bureau of Economic Analysis

(BEA) of the U.S. Department of Commerce.

•While there are literally thousands of variables in the

national income and product accounts, in this chapter we

discuss only those that are most important.

Gross Domestic Product

•gross domestic product (GDP) The total market value of

all final goods and services produced within a given period

by factors of production located within a country.

•GDP is the total market value of a country’s output. It is the

market value of all final goods and services produced

within a given period of time by factors of production

located within a country.

Final Goods and Services (1 of 2)

•final goods and services Goods and services produced

for final use.

•intermediate goods Goods that are produced by one firm

for use in further processing or for resale by another firm.

•value added The difference between the value of goods

as they leave a stage of production and the cost of the

goods as they entered that stage.

Final Goods and Services (2 of 2)

•In calculating GDP, we can sum up the value added at

each stage of production or we can take the value of final

sales.

•We do not use the value of total sales in an economy to

measure how much output has been produced.

Table 21.1 Value Added in the

Production of a Gallon of Gasoline

(Hypothetical Numbers)

Stage of

Production

Value of Sales

Value Added