GDP/GNP
Measuring the Economy
Two Measurements
GDP

Gross Domestic Product



Dollar value of all G/S
produced within a
countries borders in a given
year.
Foreign producers in US?
US companies oversees?
GNP

Gross National Product



Dollar value of all G/S
produced by citizens of a
country during a given year.
Foreign producers in the
US?
US companies oversees?
Two Calculations
Sales

Add together the receipts
for all recorded
transactions




Black market
Barter
Inflation
Variety
Salaries

Add together the salaries
of all income earned




Under the table
Efficiency
Double counting
Distribution
What GDP does NOT tell us!

Non-market Activities

Some people do activities for themselves that others pay for


Quality of Life

Production might be predicated on over-worked employees


Medical internists
Distribution of Wealth

There may be a few uber-rich people and many incredibly poor


Oil changes/lawn care
Loss of US middle class
Inflation

Values may rise without increasing production

2 Turtle Doves/automobiles
More on the limitations of GDP

Underground Activity

Illegal activities do not get recorded by governments


Per Capita Income

Some countries have huge populations while others do not


US average is just under $50,000
Variety of Goods

Economies can be narrowly focused


Drug sale/prostitution
Oil production
Negative Externality

Production can result in pollution

Cuyahoga River fire
Question B: Is GDP/GNP a good
measure of an economy? How does
knowing the statistic’s shortcomings
help in evaluating an economy? Give an
example of a country who’s GDP/GNP
does not accurately measure the
economy. State the limitation from the
chart in your notes.