Check out these other AP Macro resources

  •  Watch AP Macro live review streams every week with Fiveable+! 👉 Join Today
  • Check out this link to determine how you calculate GDP

-----

In simple terms, Gross Domestic Product (GDP) is the total value đŸ’”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? đŸš«

  • 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 rĂȘveur. 

Did this answer your question?