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Measuring the Economy 1

Terms and Formulas

Introduction and Summary

Gross Domestic Product (GDP)

Terms

Base year  -  The year from which constant prices or quantities are taken in calculations of such indices as real GDP and CPI.
Bureau of Labor Statistics  -  The government organization responsible for regularly gathering data about the economic status of the population.
Consumer price index (CPI)  -  A cost of living index that measures the total cost of goods and services purchased by a typical consumer within a country.
Fixed basket  -  A set group of goods and services whose quantities do not change over time. This is used, for instance, in the calculation of the CPI.
Gross domestic product (GDP)  -  The sum of the market values of all final goods and services produced within a particular country during a period of time.
Gross domestic product deflator (GDP deflator)  -  The ratio of nominal GDP to real GDP for a given year minus 1. The GDP deflator shows how much of the change in the GDP from a base year is reliant on changes in the price level.
Gross domestic product per capita (GDP per capita)  -  GDP divided by the number of people in the population. This measure describes what portion of the GDP an average individual gets.
Gross national product (GNP)  -  An alternative measure of economic activity to GDP. GNP is the sum of the market values of all goods and services produced by the citizens of a country regardless of their physical location.
Nominal gross domestic product (nominal GDP)  -  The sum value of goods and services produced in a country and valued at current prices.
Real gross domestic product (real GDP)  -  The sum value of goods and services produced in a country and valued at constant prices, calibrated from some base year. Real GDP frees year-to-year comparisons of output from the effects of changes in the price level.

Formulae

 
Gross Domestic Product GDP = [(quantity of A X price of A) + (quantity of B X price of B) + ... + (quantity of N X price of N)] for every good and service produced within the country

GDP = (national income) = Y = (C + I + G + NX)
 
GDP Growth Rate GDP growth rate = [(GDP for year N) / (GDP for year N-1)] - 1
 
GDP Deflator GDP deflator = [(nominal GDP) / (real GDP)] - 1
 
GDP Per Capita GDP per capita = (GDP) / (population)

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