Chapter 23

Chapter 23 introduces GDP (gross domestic product). It's a part of macroeconomics, which studies the economy as a whole. Meanwhile, microeconomics, studies single firms and how they behave with one another. GDP is meant to judge a how well a country's economy is doing based on its total income earned as a nation. For an economy as a whole, income must equal expenditure. It's true because every expenditure has a buyer and a seller. The GDP's identity is denoted in the equation Y=C+I+G+NX. GPD(Y) is divided into four parts: consumption (C), investment (I), government purchases (G), and net exports (NX). Consumption is what households spend for goods and services. Investment is purchasing goods that'll be used later to make even more goods. Government purchases is what state, local, and federal governments spend on goods and services. Net exports is buying domestically produced goods from foreigners minus the domestic purchases of foreign goods. In short, it's the exports minus the imports. The GDP deflator is calculated from the ratio of the nominal to real GDP. The equation is GDP deflator= (Nominal GDP)/(Real GDP) * 100. The nominal GDP is the production of services and goods valued at current prices. The real GDP is the production of services and goods valued at constant prices. The goal in calculating GDP is to see how well the economy is performing overall. The gross domestic product seen as a good but not perfect measure of economic well-being. This is because GDP excludes the value of leisure, clean Earth, and volunteer work.