Check out these other AP Macro resources
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- Check out this link to determine how you calculate GDP
In simple terms, Gross Domestic Product (GDP) is the total value 💵of all FINAL goods & services in a YEAR.
So what is included in GDP? ✅
- domestically (within the home country) produced goods & services
- final goods: cupcakes! not the flour used to make them
- capital goods & construction of new structures: these are known as investments
- changes to inventory
What is not included in GDP? 🚫
- Intermediate goods & services: flour used to make cupcakes
- financial assets & transfer payments (stocks & bonds)
- Inputs (factors of production)
- foreign produced goods & services
- Used goods
- illegal activities (black market)
We make sure not to include these items so that we don't over-calculate GDP.
For instance, we don't include:
- used goods because they were already included in the GDP of a previous year
- intermediate goods & services & inputs because their value is already included in the final product
- foreign goods & services because we only want to know what that domestic country has produced
- stocks & bonds because they are already existing assets, & you are only transferring ownership
You can remember what is not included in GDP by using this Acronym: IF IF U + illegal activities
Hope this helped. Till next time rêveur.