What Is Gross Domestic Product

1. The real GDP for 2009 13,973.7

a) What does the GDP tell us?

The GDP gives information regarding the country’s economy in regards to total money value on all goods, and services produced over any given period.

b) How did GDP change from 2008?

In the first and second quarter, GDP increased. In the third quarter, GDP started decreasing while exports and imports of goods and services increased. In the fourth quarter, the real GDP decreased, as well as exports and imports.

c) What caused the changes?

The causes for the changes were because of the recession; this was due to significant decline in the economy’s activity. Exports of goods and services decreased while Government spending increased.

2. What was GNP for 2009? 14,117.2

a) What is the difference between GDP and GNP?

GDP is the total market value of goods and services produced by labor and owned by a country regardless of where production took place.

b) How did GNP change from 2008?

GNP increased in 2008, but started decreasing in 2009. Domestic business, households, and the general government increased.

c) What caused the changes?

Income receipts for the rest of the world decreased, and income payments to the rest of the world decreased. Exports and imports of good and services increased.

3. What was national income (NI) for 2008? 12,609.1

a) What does National Income tell us?

The national income tells us the rate of economic growth, living standards, and any changes of income between groups or the population. It is the sum of wages, profits and pension payments to people of the nation.

b) What is the difference between GNP and NI?

National income is calculated from factor cost of earnings that arise from the production of the nation’s goods, and services.

GNP is the market value of the output of goods, and services before deducting charges for the consumption of capital goods.

c) How did NI change from 2008?

U.S. personal income growth slowed to 3.9 percent in 2008. Inflation as measured by the national price index for personal consumsion rose to 3.3 percent. Personal income growth was less than 3.3 percent with national inflation rate in 13 states. This decline was the first since 1994. Personal consumsion prices fall 1.3 percent by the fourth quarter of 2008, the largest quarterly decline ever.

d) What caused these changes?

The financial crisis was created from the housing and mortgage industry. This caused a fall in national income that lead to growth in GDP in a negative territory.

4. What was disposable income DI for 2009? 10,722.4

a) What does disposable income consist of?

The amount of income left to an individual after taxes were paid. It consists of wages, salaries, and interest payments from financial assets as well as net profit from businesses.

b) How did DI change from 2008?

Compensation of employees received fluctuated in the first three quarts of 2008. Then in the fourth quarter, they dropped from 8,036.1 to 7,804.9 in the first quarter of 2009. Wages and salary dropped steadily in 2008 as well.

c) What caused these changes?

DI changed in 2008 because of a drop in the U.S. standard cost of living. This means there was less money spent. The decline of the standard cost of living caused a decline in incomes, and an increase in consumer prices.

5. What was GDP in 2008? 31,542.1

References: www.bea.gov/index.htm