Measuring GDP and Economic Growth

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Definition of GDP
Market value of all the final goods and services produced within a country in a given time period
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Final good
Item bought by its final user during a specified time period
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Intermediate good
Item sold by one firm to another firm, to be used as a component of a final good or service
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Factors of Production
Land (rent), Labour (wages), Capital (interest), Entrepreneurship (profit)
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Definition of Net Exports
Export-Imports (X-M)
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Measuring GDP
GDP equals aggregate expenditure and equals aggregate income (Y=C+I+G+X-M)
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Depreciation
Decrease in the value of a firm's capital that results from wear and tear and obsolescence
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Net Investment
The amount by which the value of the firm's capital increases. (Gross investment - Depreciation)
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Expenditure Approach
C+I+G+(X-M)
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Income Approach
Compensation of employees (W) + Gross operating surplus (P) + Mixed income (M) + (Indirect taxes - Subsidies)
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Statistical discrepancy
Th gap between the expenditure and income measure of GDP. 0.2% of GDP in 2012
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Real GDP
The value of final goods and services produced in a given year when valued at the prices of a reference base year
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Real GDP per capita in 1962
£8,175
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Real GDP per capita in 2012
£26,631
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Potential GDP
The value of production when all the factors of production are fully employed
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Lucas wedge
The pound value of the accumulated gap between projected growth rate and Real GDP per capita
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Limitation of Real GDP
Household production, Underground economic activity, Leisure time, Environmental quality
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% of UK GDP in underground economic activity
3.5 to 13.5%
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Card 2

Front

Final good

Back

Item bought by its final user during a specified time period

Card 3

Front

Intermediate good

Back

Preview of the front of card 3

Card 4

Front

Factors of Production

Back

Preview of the front of card 4

Card 5

Front

Definition of Net Exports

Back

Preview of the front of card 5
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