Gross Domestic Product (GDP) is the total value of all goods and services which a country has produced in a given year. The following things make up GDP:
Nominal GDP: GDP that is measured based on changing prices; year to year the prices differ.
Real GDP: GDP which is calculate in one price; the price does not change year to year.
- Dollar value- is the total value of the sales of all goods and services in an economy in a year. This would include households, businesses, and the government.
- Final goods and services- these are goods sold to consumers. Intermediate goods are goods which are used to make the final product and they are different from the final goods and services.
- Production inside a country’s borders- this is only the production within a country, so it doesn’t count goods made in other countries and sold in the US. So a car made in Japan yet sold in the US would not count.
- In a given year- this factors in the year something was made. If you resell an old motorcycle, then that goes towards that years GDP and not this years since you are reselling it.
Nominal GDP: GDP that is measured based on changing prices; year to year the prices differ.
Real GDP: GDP which is calculate in one price; the price does not change year to year.