Econ Notes: Gross Domestic/National Product

Gross Domestic Product (GDP) 
-total value of all final goods and services produced withing a country's borders within a given year

Included in GDP

1. final goods
2. income earned (wages, rents, interests, and profits)
3. interest payments in corporate bonds
4. current production of final goods
5. unsold output

Excluded from GDP

1. intermediate products (semi-finished; excluded to avoid multiple counting); ex: buttons, embellishments on shirts
2. transfer payments (Social Security, unemployment compensation, scholarships)
3. purchases of stocks and bonds
4. used/secondhand goods (excluded to avoid multiple counting)
5. non-market transactions (baby-sitting, selling drugs, prostitution, volunteer work, DIY repairs/construction, growing food for personal consumption)

Calculating GDP

C = personal consumption, makes up 67% of GDP

I (or Ig) = Gross Private Domestic Investment; ex: factory equipment maintenance, construction of housing, unsold products

G = Government spending

X_n (or X - M)= Net exports [both exports (X) and imports (M)]

Gross National Product (GNP) 
-total value of all final goods and services produced by Americans in a given year; ex: American worker in Kenya will be counted in US GNP and in Kenya's GDP.