GDP Concepts and Calculations

The total market value of all final goods and services produced within a country's borders during a specific period, typically a year.

Consumption, Investment, Government Spending, and Net Exports (Exports minus Imports).

The value of all final goods and services purchased by households and individuals, including durable goods (cars, appliances), non-durable goods (food, clothing), and services (healthcare, education).

The sum of all business investments, including fixed investments (new buildings, equipment), inventory investments (changes in stock), and residential investment (new housing construction).

All government spending on goods and services, including infrastructure projects, salaries for public employees, and defense spending.

The difference between a country's exports (goods and services sold to other countries) and imports (goods and services bought from other countries).

Measures GDP at current market prices, reflecting changes in both prices and quantities of goods and services produced.

Measures GDP adjusted for inflation, reflecting changes in the quantities of goods and services produced.

GDP per capita is used to measure a country's standard of living by dividing real GDP by the country's population.

Globalization refers to the increasing interconnectedness of economies worldwide through trade, investment, and the flow of people, goods, and information.

A multinational corporation (MNC) operates in multiple countries, conducting business activities, building factories, and selling products in different nations.

International organizations play a role in shaping and regulating global economic activity, promoting economic growth, and managing international trade.

The World Bank is dedicated to reducing poverty and improving the standard of living in developing countries by providing financial assistance, technical expertise, and policy guidance.

The International Monetary Fund (IMF) seeks to promote global monetary cooperation, stabilize exchange rates, and provide loans to countries facing economic difficulties.

The World Trade Organization (WTO) regulates international trade, setting rules for global commerce and resolving trade disputes between countries.

Demand-side economics focuses on stimulating aggregate demand, or the total spending in an economy, to achieve economic growth and full employment.

Supply-side economics emphasizes policies aimed at increasing production and investment by lowering taxes and reducing regulations, leading to economic growth.

The Laffer Curve is a hypothetical economic model that shows the relationship between tax rates and government revenue. It suggests that at some point, increasing tax rates may actually lead to a decrease in government revenue.

Automatic stabilizers are government policies, such as unemployment benefits and progressive taxation, that automatically adjust to stabilize the economy during economic fluctuations.

Easy-money policy is a monetary policy strategy used by central banks to stimulate economic growth by lowering interest rates and increasing the money supply.

Tight-money policy is a monetary policy strategy used by central banks to slow economic growth and reduce inflation by raising interest rates and reducing the money supply.

Open-market operations involve the buying and selling of government securities (bonds) by central banks to influence the money supply and interest rates.

The reserve requirement is a regulation that requires banks to maintain a certain percentage of their deposits as liquid reserves, which cannot be used for lending.

The discount rate is the interest rate at which commercial banks can borrow money directly from the central bank.

The federal funds rate is the interest rate at which banks lend reserve balances to each other overnight, representing the benchmark interest rate in the money market.

Keynesian economics advocates using government fiscal policy (spending and taxation) to manage the economy. It believes that government intervention is necessary to stimulate demand and combat recessions.

Monetarism emphasizes the importance of controlling the money supply to stabilize the economy. It believes that the central bank (like the Federal Reserve) should focus on controlling inflation by adjusting interest rates and the money supply.