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    Components of the GDP

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    There are probably a thousand macro economic indicators, some measure the overall national economy, some are more limited in scope. The three most often quoted and publicized are the Gross Domestic Production Index (GDP), the Consumer Price Inflation Index (CPI) and the Unemployment Index. Please complete the short answer questions regarding these three indicators:

    (see attached file for data)

    a) What is the value of GDP?
    b) In each of the following cases, indicate if GDP is affected, under what category and what happens to GDP. Be sure to explain why or why it is not included.
    - You buy a textbook from one of your classmates
    - You buy a new umbrella
    - Ella, a French tourist, has a haircut in a salon in San Francisco
    - Oklahoma cleans up after a devastating tornado
    - A pension payment to a retired military person

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    Solution Preview

    Step 1
    There are four major components of GDP. These components are household consumption, investment, government spending, and net exports.
    The GDP = C + I + G + (X - M). Where C stands for personal consumption, I stand for gross private Investment, G stands for government purchase of goods and services, and X - M stands for net exports (a).
    The GDP = 1,000 + 500 + 280 + 300.
    GDP = 2,080 billion. ...

    Solution Summary

    This solution explains the components of the GDP. The sources used are also included in the solution.