Gross Domestic Product (Measuring Economic Activity)
- GDP is the total output of all economic activity in a country over a given period and a country’s GDP will include domestic output by foreign owned firms.
- GDP has a mathematical relationship with the measures of gross national income (GNI) and net national income (NNI)
- GNI = the sum of all incomes for residents of a country regardless of the location of the assets of these residents
- NNI = GNI less depreciation of physical capital
GDP + interest, dividend, rent and profit abroad = GNI
GNI – physical capital depreciation = NNI
- Expenditure Approach to GDP
GDP = Personal Consumption + Investment + Government Consumption + (Exports – Imports)
GDP = C + I + G + (X-M)
- GDP at Factor Cost = Expenditure Approach GDP – Indirect Taxes + Subsidies
- GDP does not include items such as: government transfer payments, gifts, unpaid household activities, trades, second hand transactions (ex. selling used goods on Ebay), and transactions involving illegal goods.
- Nominal GDP = GDP in current prices
- A price deflator must be applied to the current GDP in order to compare current GDP to the GDP of a prior year.
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LESSONS
- CFA Level 2: Economics - Introduction
- Economic Growth
- Changes in Productivity: The One-Third Rule
- The Productivity Curve
- Economic Growth Theories
- Government Regulation, Deregulation, and Regulatory Behaviour
- Gross Domestic Product (Measuring Economic Activity)
- International Trade & Trade Restrictions
- Balance of Payments
- Foreign Exchange Rate Systems and Parity Relationships
- Foreign Exchange Floating Rate Systems
- Fixed Exchange Rate Systems
- Overview of Currency Markets
- Forward Exchange Rates
- Interest Rate Parity
- Purchasing Power Parity (PPP)
- International Fisher Relation
- Uncovered and Covered Interest Rate Parity Relationship
- Forecasting Exchange Rates
- CFA Level 2 Economics – Recommendations
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