- A
nation's overall levels of income, employment, and prices are determined
by the interaction of spending and production decisions made by all
households, firms, government agencies, and others in the economy.
- Gross
Domestic Product (GDP) is the most comprehensive measure of a nation's
economic output and income. It is the total market value, measured
in dollars, of all final goods and services produced in the economy
in one year.
- Per
capita GDP is GDP divided by the country's population.
- When
consumers make purchases, goods and services are transferred from
businesses to households in exchange for money payments. That money
is used in turn by businesses to pay for productive resources (natural,
human, and capital), and to pay taxes. One person's spending is another
person's income. Furthermore, an initial change in spending (consumption,
investment, government, or net exports) usually results in a larger
change in national levels of income, spending, and output.
- Nominal
GDP is measured in current dollars; thus, an increase in GDP may reflect
not only increases in the production of goods and services, but also
increases in prices. GDP adjusted for price changes is called real
GDP. Real
GDP per capita is a measure that permits comparisons of material living
standards over time and among different nations. The potential level
of real GDP for a nation is determined by the quantity and quality
of its natural resources, the size and skills of its labor force,
and the size and quality of its stock of capital resources.
- When
desired expenditures for consumption, investment, government spending,
and net exports are greater the the value of a nation's output of
final goods and services, GDP rises, and inflation occurs and/or employment
rises. When desired expenditures for consumption, investment, government
spending, and net exports are less than the value of a nation's output
of final goods and services, GDP decreases and inflation and/or employment
decreases.
|
