The text reads as follows.

Gross Domestic Product (G D P): The market value of all final goods and services produced within a country in a year.

The market value: Value each product at its market price of all: Include all goods and services final goods and services: Count only final goods and services, omitting intermediate goods produced: Omit re-sale of already-purchased goods within a country: Include all goods produced within the United States (even by foreign-owned business), but exclude goods produced overseas (even by American-owned businesses). in a year.: Add up the flow of output over a year

An equation reads, Y (G D P) equals C (Consumption) plus I (Investment) plus G (Government purchases) plus N X (Net exports)

G D P is Total spending; It can be measured as a Y equals C plus I plus G plus N X; That measurement is called ‘Gross Domestic Product.’

G D P is Total output; It can be measured as a Sum of value added equals Total sales minus cost of intermediate inputs; That measurement is called ‘Value Added.’

G D P is Total income; It can be measured as a Total wages plus Total profits; That measurement is called ‘Gross Domestic Income.’

These measurements of G D P get different names because even though they are the same in theory, real-world measurements of each can differ because each relies on different sources of imperfect data.

Limitations of G D P

1. Prices are not values

2. Nonmarket activities are excluded

3. The shadow economy is missing

4. Environmental degradation isn’t counted

5. Leisure doesn’t count

6. G D P ignores distribution

Real and Nominal Variables

Nominal G D P: Adds up the market value of total production in a year using the current prices prevailing in that year.

Real G D P: Excludes the effects of price changes, so it isolates economic growth that’s due to changes in the quantity of output produced.

An equation reads, Percent Change in real G D P equals Percent Change in nominal G D P minus Percent Change in prices.

Four Strategies for Scaling Big Numbers

1. Evaluate what it means per person

2. Compare big numbers to the size of the economy

3. Compare big numbers to their own history

4. Use the Rule of 70 to evaluate long-run growth rates

The Rule of 70: Years it takes something to double equals 70 over Annual growth rate