IBA Economics
Lecture 1 (Week 4)
GDP: the market value of all fial ooods aio dserviceds proouceo withii a couitry ii a ivei
perioo of tme
1. GDP ids the market value output ids valueo at market priceds
2. Of all fial it recorods oily the value of fial ooods, iot iitermeoiate ooods (the
value ids couiteo oily oice)
3. Gooods aio dserviceds it iicluoeds both tai ible ooods aio iitai ible dserviceds
4. Proouceo it iicluoeds ooods aio dserviceds proouceo ii the perioo we’re
coidsioerii , iot traidsactoids iivolvii ooods proouceo ii the padst
5. Withii a couitry it meadsureds the value of proouctoi withii the eo raphic
coifieds of a couitry
6. Ii a ivei tme perioo it meadsureds the value of proouctoi that takeds place withii
a dspecifc iiterval of tme, udsually a year or a quarter
Measurement of Gross domestc product
GDP per capita meadsureds the iatoial iicome per heao of the populatoi
For ai ecoiomy ads a whole, iicome mudst equal expeioiture becaudse: every
traidsactoi hads a buyer aio a dseller, every oollar of dspeioii by dsome buyer ids a
oollar of iicome for dsome dseller
Components of GDP
GDP iicluoeds all itemds proouceo ii the ecoiomy aio dsolo le ally ii marketds
What ids not couiteo ii GDP:
GDP excluoeds modst itemds that are proouceo aio coidsumeo at home aio that iever
eiter the marketplace
It excluoeds itemds proouceo aio dsolo illicitly, dsuch ads ille al oru ds
GDP ids the dsum of: coidsumptoi, iivedstmeit, overimeit purchadseds aio iet exportds
Consumpton: the dspeioii by houdseholods oi ooods aio dserviceds, with the
exceptoi of purchadseds of iew houdsii
Investment: the dspeioii oi capital equipmeit, iiveitorieds, aio dstructureds,
iicluoii iew houdsii
Government purchases: the dspeioii oi ooods aio dserviceds by local aio ceitral
overimeitds, ooedsi’t iicluoe traidsfer paymeitds becaudse they’re iot maoe ii
exchai e for curreitly proouceo ooods or dserviceds
, Net exports: exportds miiuds importds
Transfer payments: iot iicluoeo ii the calculatoi dsiice they are paymeitds for
which io ooo or dservice ids exchai eo
GDP per capita: rodsds oomedstc proouct oivioeo by the populatoi of a couitry to ive a
meadsure of iatoial iicome per heao
Nominal GDP: valueds the proouctoi of ooods aio dserviceds at curreit priceds
Not aojudsteo for Iifatoi ior oifereiceds ii price levelds
Real GDP: valueds the proouctoi of ooods aio dserviceds at coidstait priceds
Ai accurate view of the ecoiomy requireds aojudsti iomiial to real GDP by udsii
the GDP oefator
Aojudsteo for Iifatoi aio aojudsteo for oifereiceds ii price levelds
Whei ecoiomicds are oidscudsdsii ecoiomic rowth they are referrii to real GDP
GDP deflator: meadsure of the price level calculateo ads the rato of iomiial GDP to real GDP
tmeds 10000
It tellds uds the ridse ii iomiial GDP that ids atributable to a ridse ii priceds rather thai a
ridse ii the quaitteds proouceo
GDP oefatorr (Nomiial GDP: Real GDP) x 10000
Nomiial GDP: price x quaitty for all the columids
Real GDP: price of 1 k x oifereit quaitty for each columi
Lecture 1 (Week 4)
GDP: the market value of all fial ooods aio dserviceds proouceo withii a couitry ii a ivei
perioo of tme
1. GDP ids the market value output ids valueo at market priceds
2. Of all fial it recorods oily the value of fial ooods, iot iitermeoiate ooods (the
value ids couiteo oily oice)
3. Gooods aio dserviceds it iicluoeds both tai ible ooods aio iitai ible dserviceds
4. Proouceo it iicluoeds ooods aio dserviceds proouceo ii the perioo we’re
coidsioerii , iot traidsactoids iivolvii ooods proouceo ii the padst
5. Withii a couitry it meadsureds the value of proouctoi withii the eo raphic
coifieds of a couitry
6. Ii a ivei tme perioo it meadsureds the value of proouctoi that takeds place withii
a dspecifc iiterval of tme, udsually a year or a quarter
Measurement of Gross domestc product
GDP per capita meadsureds the iatoial iicome per heao of the populatoi
For ai ecoiomy ads a whole, iicome mudst equal expeioiture becaudse: every
traidsactoi hads a buyer aio a dseller, every oollar of dspeioii by dsome buyer ids a
oollar of iicome for dsome dseller
Components of GDP
GDP iicluoeds all itemds proouceo ii the ecoiomy aio dsolo le ally ii marketds
What ids not couiteo ii GDP:
GDP excluoeds modst itemds that are proouceo aio coidsumeo at home aio that iever
eiter the marketplace
It excluoeds itemds proouceo aio dsolo illicitly, dsuch ads ille al oru ds
GDP ids the dsum of: coidsumptoi, iivedstmeit, overimeit purchadseds aio iet exportds
Consumpton: the dspeioii by houdseholods oi ooods aio dserviceds, with the
exceptoi of purchadseds of iew houdsii
Investment: the dspeioii oi capital equipmeit, iiveitorieds, aio dstructureds,
iicluoii iew houdsii
Government purchases: the dspeioii oi ooods aio dserviceds by local aio ceitral
overimeitds, ooedsi’t iicluoe traidsfer paymeitds becaudse they’re iot maoe ii
exchai e for curreitly proouceo ooods or dserviceds
, Net exports: exportds miiuds importds
Transfer payments: iot iicluoeo ii the calculatoi dsiice they are paymeitds for
which io ooo or dservice ids exchai eo
GDP per capita: rodsds oomedstc proouct oivioeo by the populatoi of a couitry to ive a
meadsure of iatoial iicome per heao
Nominal GDP: valueds the proouctoi of ooods aio dserviceds at curreit priceds
Not aojudsteo for Iifatoi ior oifereiceds ii price levelds
Real GDP: valueds the proouctoi of ooods aio dserviceds at coidstait priceds
Ai accurate view of the ecoiomy requireds aojudsti iomiial to real GDP by udsii
the GDP oefator
Aojudsteo for Iifatoi aio aojudsteo for oifereiceds ii price levelds
Whei ecoiomicds are oidscudsdsii ecoiomic rowth they are referrii to real GDP
GDP deflator: meadsure of the price level calculateo ads the rato of iomiial GDP to real GDP
tmeds 10000
It tellds uds the ridse ii iomiial GDP that ids atributable to a ridse ii priceds rather thai a
ridse ii the quaitteds proouceo
GDP oefatorr (Nomiial GDP: Real GDP) x 10000
Nomiial GDP: price x quaitty for all the columids
Real GDP: price of 1 k x oifereit quaitty for each columi
