Rasmussen College Module 5 Principle of Economics GDP Questions Gross Domestic Product (GDP) is defined and the sale of final goods produced within a count

Rasmussen College Module 5 Principle of Economics GDP Questions Gross Domestic Product (GDP) is defined and the sale of final goods produced within a country’s borders over a specified time-frame.

GDP = C + I + G + NX

Where, C = Consumption; I = Investment; G = Government Spending, and; NX = Net Exports (Exports – Imports).

Real GDP accounts for inflation and fluctuations within our economy.

Nominal GDP is the dollar amount assignment to the sale of final goods and services within our countries borders, or it can be written as:

Σ = P (Price) * Q (Quantity)

GDP is used as a key economic indicator as it provides a bird’s eye view of our economy and GDP is used to measure one country against others. GDP provides an economic synopsis of a country.

GDP follows our country’s business cycle; for example, during an expansionary phase of the business cycle in which interest rates and inflation are at higher levels it would be undesirable to purchase large ticket items. Whereas, during a recessionary phase of the business cycle in which interest rates and inflation are lower levels would be the best time to purchase large ticket items.

GDP does not account for the following items:

Leisure time
Happiness
Goods sold second hand
Domestic production
Goods and services sold on the black market

Human Development Index (HDI) is used to measure the social aspects of domestic consumers. The HDI measure social factors such as life expectancies, per capita income, and levels of education. One can view GDP as the economic indicator looking at our economy and, the HDI at a lower level by looking at the social well-being of domestic consumers.