Gross Domestic Product (GDP)

 … a core concept in The Study of Macroeconomics

Concept description

GDP is the market value of all finished goods and services produced within a country in a year. (See Alex Tabarrok, reference below and video to right.)

Tabarrok emphasizes the following points from this definition.

• A finished good is something that is not sold again as part of some other good.
• A capital good can be used to make other goods, but it will not be sold again as part of another good, so it is classified as a finished good.
• A good imported from another country is not included in the GDP, but a good exported to another country is.
• If a good (e.g., polar bears) is not bought or sold in a market then it is not included in the GDP because there is no agreed way to assess its value.

MRU practice questions

See http://www.mruniversity.com/node/329125?utm_source=MacroAnnot&utm_medium=PQAnnot&utm_campaign=MRUYTAnnotation.

1. GDP includes
   1. All final goods.
   2. All final services.
   3. Both final goods and final services.
2. Which of the following is counted in US GDP:
   1. Used car purchased by a student for his commute to school
   2. Used oven purchased by a baker for her cake shop 
   3. Drill purchased by a construction company
   4. b & c only
   5. None of the above
3. Which of the following is counted in US GDP:
   1. A New video game made in China but purchased in the United States
   2. New growth in rainforests
   3. A new quilt made by Jane and given to her grandmother for her 80th birthday
   4. a & c only 
   5. None of the above

Source

Tyler Cowen, What is Goss Domestic Product (GDP)?, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-macroeconomics, accessed 20 April 2016.

Atlas topic and subject

The Study of Macroeconomics (core topic) in Macroeconomic Policy.

Page created by: Ian Clark, last modified on 20 April 2016.

Image: Tyler Cowen, What is Goss Domestic Product (GDP)?, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-macroeconomics, accessed 20 April 2016.