What is Gross Domestic Product?

1
What is Gross Domestic Product?
2
What did you make?

• Do you know what you made at your job last week?
• Last year?
• Do your earnings increase or decrease since last
  week?
• Last year?

3
GDP is

• Governments, economists, and politicians want to
  know what the countrys earnings were, and
  whether they are increasing or decreasing.
• The countrys earnings are measured using GDP

4
GDP is

• Gross Domestic Product measures the total value
  at market prices of all final goods and services
  produced in Canada over a period of time.

5
Final Goods and Services?

• Final goods and services are those that are not
  going to be sold again.
• Ex. Bread is a final good, wheat and flour are
  not.
• You do not want to add the price of the good more
  than once.

6
Produced in Canada

• GDP measures domestic output of goods and
  services. That is, output from within Canada no
  matter who owns the product.
• GNP (Gross National Product) calculates
  Canadian-owned products no matter where they are.

7
Calculating GDP

• Expenditure approach includes the expenditures
  of households on consumer goods, of business
  people on investment, the difference between
  imports and exports, and government expenditures.
• See figure 8.6 on page 169

8
Calculating GDP

• Income approach includes the total amount of
  paid wages, rent, interest and profit (4 factors
  of production)
• (labour, land, capital, and entrepreneur)

9
Calculating GDP

• Economists prefer to use the income approach
  because the data is more accurate.
• governments make both individuals and businesses
  keep track of every penny of income so it can be
  taxed.

10
Calculating GDP

• When calculating GDP, allowances must be made for
  depreciation (see Wheatland I) and indirect taxes
  (see Wheatland II)
• Pages 168-169