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International Business awareness (Economics) samenvatting
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Power Point lecture 1 Week 2Gross domestic product (GDP): The market value of all final goods and services produced in a
country in a given period of time.
Disposable income: The left over income after paying taxes and receiving transfers from the
government.
GDP per capita: The GDP divided by the population of the country.
The whole income of a country has to be equal to the whole expenses of a country because:
- Every seller has a buyer and every buyer has a seller.
- Every dollar a buyer spends is a dollar income for a seller.
The GDP includes all the items that are produced and sold on legal markets. What is not included?
- Items that are produced at home and never enter the marketplace.
- Items that are sold illegally, such as illegal drugs.
GDP (Y) is a sum of the following: Y= c + i + g + nx
C Consumption: The amount households spend on goods and services. With exception of
purchasing a new house.
I Investments: Spending money in things to make more money out of it. For example new
housing and stocks.
G Government purchases: The local or central government spending money on goods and
services. Does not includes transfer payments, because they don’t exchange services or
goods.
NX Net exports: exports – imports
Nominal GDP: The value of the production of the goods and services at the current prices.
Calculation nominal GDP= price x quantity
Real GDP: (intrensieke waarde) The value of the produced goods and services at constant prices.
Calculation real GDP= price base year x quantity
GDP deflator: It measure the inflation of the goods and services in a country in a given period of
time.
Formula GDP deflator= nominal GDP : real GDP x 100
Formula Real GDP= nominal GDP : GDP deflator x 100
The GDP is the best measure of economic well-being of a society. It tell us what the mean income of
a country is. How higher the GDP is how higher the economic well-being.
Downsides of the GDP:
- It does not measure the happiness and quality of life.
- Things the contribute to well-being are not included. Such as free time, clean environment,
activities that take place outside the market such as volunteer work and spending time with
children.
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