11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)
Other Measures of Total Production and Total Income
11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)
Other Measures of Total Production and Total Income - Video Tutorials & Practice Problems
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Other Measures of Total Production and Total Income
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So we focus mostly on GDP gross domestic product as a measure of production or income in a society. Let's go ahead and go through some other measures as well that that sometimes come up. So we're mostly gonna take a definitional approach and just discuss in on a high level some of these other topics that come up because they're kind of rare, they're not tested as often. But I wanted to make sure you have a resource for for these other special topics that come up here. Alright, so we mostly focus on GDP because that's what what gets used as this measure most often. And remember that's the value of goods and services produced domestically, right? Final goods and services. The value of those final goods and services produced domestically as we've focused on throughout all of these videos. Now there's another one like GDP called G. N. P. So instead of domestic product of things produced domestically, we want to think about things produced by our nation. So sometimes our citizens will produce stuff overseas, right? Or sometimes foreigners will produce stuff inside domestically within our borders. However, another measure is to focus on just our citizenry, what our citizens produce, whether it was here or abroad. So what we're gonna have to do is include goods and services produced by us owned facilities and exclude goods and services produced by foreign owned facilities. Okay, so G. N. P. Is going to take a little different approach and just focus on our citizens. Instead of domestic, what is produced domestically. Okay, now GDP is generally a better measure because it takes into account this foreign investment because sometimes in developing countries there's a lot of foreign owned uh investment that gets put into that country and that wouldn't be included in GNP. So these foreign investments would not be included in GNP and it would make their production seem smaller, even though they have a lot of production happening, although it's it's not domestic owned by that that nation, its investment from other other countries. Right? So that's G. N. P. Let's move on to the next one here. Net domestic product. So net domestic product is pretty easy. It's just G. D. P. Minus depreciation. Okay, we're taking depreciation out of our GDP calculation, right? Because we have gross gross means in total, net means adjusted for in this case depreciation, gross minus something equals net, Okay, so net domestic product is just G. D. P minus depreciation. Let's go on to national income. So national income is the flip side of what we've been learning when we've talked about GDP, we focused on the expenditures approach, right? Where we're taking consumption plus investment plus government purchases plus net exports and that was equal to G. D. P. But we could think of it the other way remember from this approach, we're thinking of everything that gets spent, all the consumption, everything households spent investment spending by businesses and and and that type of investment, government spending, right spending spending. However we can think of it from the other approach where everything that gets spent gets earned by someone else. So expenditures equals income, in theory. Right, So the expenditures are going to equal the income, so we can think of national income as another way to measure GDP. Okay, so the total value of expenditures must, on the other hand, be earned by the sellers of whatever is being um spent on. But this is generally beyond the scope of the course, more likely that you're just gonna need to know the definition of anything next is personal income. So what do you think? Personal income, it's income received by households? So it's gonna exclude corporations. In that case, we're just thinking about the actual, you know, population of the country. So this is also gonna include transfer payments such as welfare. Oh, I've got it written there at the end, So yeah, welfare or interest on financial investments, that's going to be included in personal income. The main thing is that we're leaving out the income of corporations there, it's just the household income. So we can adjust that personal income to be disposable income. So we're just gonna take out taxes. So it's the income received minus taxes. Well, that's what's left over to be spent when we talk about disposable income that's money that you have left over to spend on whatever you want. Okay, so this this represents the money that's actually available to spend by households, and there's two things generally that households spend their money on, They can spend it on consumption or savings, and we're going to get more into the idea of savings and how that affects the economy in other videos, but that's basically what disposable income can be used for current consumption right now or saving for future consumption. Cool. Alright, so this is mainly just the definitions that you want to be aware of, nothing too too important in this video, compared to our main discussion in this section about GDP. Alright, let's go ahead and pause here and move on to the next video.
