Chapter 7: Measuring Domestic Output & National Income 10/08/2013
(Used) Real GDP: The dollar value of all goods produced in a country at base year
prices from the past
(Not used) Nominal GDP: The dollar value of all goods produced in a country at current
prices in one country in a given time
GDP includes on the market value of final goods and ignores intermediate goods
altogether. This is because the value of final goods already includes the value of all the
intermediate goods that were used in producing them. Avoid multiple counting.
Intermediate goods: products that are purchased for resale or further processing or
Final goods: products that are purchased by their end users
Can avoid multiple counting by measuring and cumulating on the value added.
Ex: The value added by firm B is $60, the difference between the $180 value of its
output and the $120 it paid for the input from firm A.
3 ways to calculate GDP
1. Price x Quantity