Gdp+deflator+vs+cpi

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domsr

Business Économie & finance

With an Indian Perspective Prepared By : Abhishek MBA 1 st Year DoMS ,IITR

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Source: rbidocs.rbi.org.in/rdocs/Speeches/PDFs/IAEDF140110.pdf

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Gross Domestic Product Erskine S. Walther, Ph.D. GDP: Defined GDP: The market value of all final goods and services produced in an economy in a specific period of time. Market Value: The measurement is in current prices, this known as Nominal GDP or just GDP. Final Goods and Services: Goods and services that have reached their final usage. They are not used to produce another good or service. Goods that are used in that way are Intermediate Goods. Intermediate Goods and Services are those that are used as inputs into the production of other goods and services. There are not directly counted in GDP as their value is included in the value (price) of the final goods and services. Thus, counting them directly would double count the same output. However, if the intermediate good has not been sold, it is counted in GDP as inventory. GDP Defined: continued Specific Period of Time: GDP can be computed for a month, a quarter or a year. The most common measures are annually and quarterly. Formal, Legal Markets: Only goods and services that are traded in formal, legal markets are counted in GDP. Underground Economy: The underground economy is composed of economic transactions involving activities that are not legal activities in a given society. These are not included in GDP. Illegal drugs and illegal gambling are common examples. Informal Economy: These are legal activities that do no go through formal markets. They are not included in GDP. Income not reported for taxation purposes or work done for barter are examples of informal economic activities. Some authors include legal activities as part of the underground economy definition. GDP Defined: continued Household Production: Productive activities done in and for the household are not counted in GDP as there is no direct monetary payment for such activities. (If you give children an allowance for household chores that would be part of the informal economy. If you clean your own home, that is household production.) Leisure Activities: Leisure activities that do not involve the purchase of goods and services are not counted in GDP. Spending an afternoon with family and friends that does not involve buying goods or services would not be counted in GDP as no economic transaction has occurred. A vacation involving paid activities does count in GDP as goods and services are purchased. GDP: Purpose The Purpose of GDP is to measure the total output of goods and services in any economy during a specific period of time. GDP is Value Neutral: It makes no judgments regarding product quality or whether or not a good or service is “good” for you. Those judgments are left to the consumer who is assumed to be able to make intelligent decisions that reflect their own personal tastes, preferences and values. Changes in GDP measure economic growth. Economic growth is the increase in the output of goods and services in an economy over a specific period of time. This must b ...

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