9/29/25
Gross Domestic Product (GDP)
The market value of all final
goods and services produced
·
within a country during a given period of time typicallyI year.
,
Intermediate goods and Physical Capital
·
Intermediate goods are used to produce other final goods of
which they are a component
They directly included in GDP calculations , that would
·
are not
lead to double counting
Physical Capitol refers to factories ,machines , and other tools
·
that are used to produce final goods but
, of which they are
not a component
It is directly included in Gbp calculations
·
How do we include the value of newly produced physical capitol ?
Net Investment the amount which the physical capitol
by
·
:
stock grows during a particular year
Gross Investment :
the amount of new physical capitol that
·
is produced during a particular year
Depreciation the amount of existing physical
·
:
capitol
that wears out , becomes obsolete , or becomes otherwise
unusable during a particular year
net investment
=
gross investment
-
depreciation
,9/29/25
net investment =
gross investment-depreciation
Year Stock of Physical Capitol (on Dec . 31)
2022 $182 billion
2023 5) 196 billion $14 billion
9) $21 billion
2024 217 billion
Gross National Product (GNP) vS GDP
.
US GNP includes final goods and services that are
·
produced by us firms
US GDP includes final goods and services that are
·
produced in the United States
very similar because most goods produced in US
·
US firms and goods
are by ,
most produced by US
firms are by us companies
, 10/1/25
Two Approaches to Calculating GDP
1. Expenditure Approach
.
2 Income Approach
Expenditure Approach
Aggregate Expenditure (AE) =
total spending :
GDP
70 % 18 % 20 %
-
8%
AE =
C +
I +
G +
(X M)-
·
C =
consumer spending
:
all spending on newly produced
goods and services bu individuals and households
·
does not include used goods (thrifting , old house) new homes +
I private investment spending spending by firms
·
= :
on
newly
produced physical capitol and newly produced homes
·
G =
government purchases spending by the government
: of
newly produced goods and services
does not include transfer
·
payments
·
(X-M) :
net exports the value of all exports minus
:
imports
Income Approach
wages paid to labor
rental income paid to land
interest income paid to capital
proprietors' income
+Corporate profit
net domestic income at factor prices
+
depreciation "net taxes
GDP
Gross Domestic Product (GDP)
The market value of all final
goods and services produced
·
within a country during a given period of time typicallyI year.
,
Intermediate goods and Physical Capital
·
Intermediate goods are used to produce other final goods of
which they are a component
They directly included in GDP calculations , that would
·
are not
lead to double counting
Physical Capitol refers to factories ,machines , and other tools
·
that are used to produce final goods but
, of which they are
not a component
It is directly included in Gbp calculations
·
How do we include the value of newly produced physical capitol ?
Net Investment the amount which the physical capitol
by
·
:
stock grows during a particular year
Gross Investment :
the amount of new physical capitol that
·
is produced during a particular year
Depreciation the amount of existing physical
·
:
capitol
that wears out , becomes obsolete , or becomes otherwise
unusable during a particular year
net investment
=
gross investment
-
depreciation
,9/29/25
net investment =
gross investment-depreciation
Year Stock of Physical Capitol (on Dec . 31)
2022 $182 billion
2023 5) 196 billion $14 billion
9) $21 billion
2024 217 billion
Gross National Product (GNP) vS GDP
.
US GNP includes final goods and services that are
·
produced by us firms
US GDP includes final goods and services that are
·
produced in the United States
very similar because most goods produced in US
·
US firms and goods
are by ,
most produced by US
firms are by us companies
, 10/1/25
Two Approaches to Calculating GDP
1. Expenditure Approach
.
2 Income Approach
Expenditure Approach
Aggregate Expenditure (AE) =
total spending :
GDP
70 % 18 % 20 %
-
8%
AE =
C +
I +
G +
(X M)-
·
C =
consumer spending
:
all spending on newly produced
goods and services bu individuals and households
·
does not include used goods (thrifting , old house) new homes +
I private investment spending spending by firms
·
= :
on
newly
produced physical capitol and newly produced homes
·
G =
government purchases spending by the government
: of
newly produced goods and services
does not include transfer
·
payments
·
(X-M) :
net exports the value of all exports minus
:
imports
Income Approach
wages paid to labor
rental income paid to land
interest income paid to capital
proprietors' income
+Corporate profit
net domestic income at factor prices
+
depreciation "net taxes
GDP
