what is gdp? is it a good measure?
TRANSCRIPT
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Economic Growth
GDP
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Economic Growth
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Economic Growth
Is defined as increasing production to satisfy the needs and wants of society.
Measured by GDP (Gross Domestic Product)
We like to see the GDP growth rate from 3-5% per year.
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GDP: Gross Domestic Product
• Measures Economic Growth in dollars.• C+I+G+(Ex-Im)=GDP• Value of all the products and services
produced in the economy (every market). • Potential GDP is represented along the
PPF curve.
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What is counted in GDP?
• New products.• “Final” products. • Legal products.
• Why? To avoid double counting and other inaccuracies as well as only encouraging legal trade.
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Problems with GDP• GDP vs. GPA– GPA counts only your grades, but not your extra-
curriculars, your peer relationships, and other factors that can be a better judge of you as a student. GDP is similar in that it only counts what is produced and sold, and nothing else.
– So a tomato that you grow in your garden doesn’t count towards GDP. Pollution is actually considered a good thing because it is a result of production.
• Doesn’t measure all activity, such as illegal trade.
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Problems with GDP
• Gross Happiness Index
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Happy Planet Index
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Satisfaction with Life Index
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Human Development Index
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Types of GDP
• Nominal GDP: Actual numbers in today’s dollars.
• Real GDP: Adjusted for Inflation which allows it to be more easily compared to past dollars.
• Per Capita GDP: Average GDP per person: a much more useful comparison tool with other countries that have different population sizes.
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GDP per Capita
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GDP per capita PPP
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GNP vs. GDP
• Gross National Product is the measure of all American businesses both here in the US and abroad. (e.g.: Wal-Mart sales in both the US and in China)
• Gross Domestic Product measures all US sales regardless of where the business originates from. So for Toyota, a Japanese car company, sales in the US count for our GDP, but sales in Japan do not.
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Difference between GNP and GDP