Eco notes 1 Unit 2

Eco Notes 1 Unit 2 1/27/15

National income accounting- Economist collect statistics on production, income, investing, and saving

2 ways to calculate GDP

1-      How much gas costs

GDP- gross domestic product

GNP- gross national product

GDP- total dollar value of all final goods and services produced within a countries borders within a given year ex. Nike

In GDP- C+ Ig+ G+ Xn

                C- consumption- 67% of economy final goods and services

                Ig- gross private Domestic Investment 4 things under category

1-      Factory equipment maintenance

2-      New factory equipment

3-        Construction of housing

4-      Unsold inventory of product built in a year

                G- Government spending ex. School districts and military

                Xn- Net imports= exports – imports

Not in GDP-

1)      Used or secondhand goods

2)      Intermediate goods – goods and services that are purchase or resale or for further processing or manufacturing  avoid double or multiple counting

3)      Non- market activities- ex. Volunteer activities, babysit, chores, illegal drug sales, trading

4)      Financial transactions  ex. Stocks bonds real estate

5)      Gifts or transfer payments 2 types public and private             

                Private- simply transferring funds from one individual to another ex. Scholarship

                Public- where recipients contribute nothing to current production ex. Social security, welfare

GNP- a measure of what its citizens produced and whether they produced these items within its borders