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GDP for short, this is the market value of all final goods and services produced within a country in a given year. We typically calculate GDP by its components:
GDP = Consumption + Investment + Government Spending + (Exports - Imports)
- or -
GDP = Wages + Rent + Interest + Profits
GDP only counts the market value of final goods and services which are traded in an open market . That means it doesn't include:
The value of leisure time
Household production
Production on the Black Market
When comparing two countries or time periods, the best measure is GDP per Capita, which divides GDP by the population of the country at the time. We can also calculate growth rates with these measures.
Real GDP adjusts for inflation by computing the GDP using past prices. When thinking about real GDP, one should think of it as output.
Answer each question on a piece of paper. Then watch the solution video. Trust me, I make the answer look easy. If you don't try it first, you won't build up your mechanism for answering Assessment questions.