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Breaking It Down
Read the following definition: “The gross domestic
product (GDP) is the total dollar value
of all final goods and services produced
in a nation in a year.” What does this mean, and how is the GDP measured?
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1. |
Why is the
word “value” so important here? When figuring the GDP, economists
do not simply count all of the goods and services produced in one
year. They total the value of the items and question what the good
or service was worth. How do they do this? They use the dollar as
a standard for measurement. |
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2. |
Why is the
word “final” so important here? When figuring the GDP, economists
add up final goods and services that were produced. They do not break
down final products and count subitems. For example, they would not
add four tires to the price of a new car. They would only count the
car (since the tires are already included). |
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