1Gross Domestic Product (GDP)
The total value of goods and services produced in an economy
2Limitations
Misses production from the underground economy, only counts final goods and services, includes inventories
3Economic Activity (Income Approach)
Compensation of employees, other income, corporate profits, net factor income, depreciation
4National Income Identity
Y=C+I+G+NX
5Nominal GDP
Using same year prices
6Real GDP
Using base year prices
7Price Level
Nominal GDP/Real GDP
8Converting Quarterly Levels
Annualize a quarterly rate Compute gquarterly = Yq−Yq−1/Yq−1
Compute gannual = 100 × [(1 + gquarterly)4 − 1]
Still a quarterly time series, but expressed in annualized growth rate: quarter-on-quarter (seasonally adjusted) annual rate
9Computing Yearly Rate Directly
Compute gannual = 100 × [ Yq −Yq−4 ]
Yq−4
Still a quarterly time series, but expressed in annualized
growth rate: year-on-year (seasonally adjusted) annual rate
10GDP Deflator
100 x Nominal GDP/Real GDP
11Personal Consumption
100 x Nominal PCE for year y/Real PCE for year y
12Stock Measure
Have a meaning at a give point in time
13Flow Measure
Has a meaning within a period