Answer to Question #308993 in Macroeconomics for Kinza Tariq

Question

1. Define the term gross domestic product. Explain which transactions in the economy are included in GDP.

Answer 1

GDP is the standard measure of the value added created through production of goods and services in a country during a certain period, which also measures the income earned from production, or the total amount spent on the final goods and services. Economic transactions included in GDP are paid-in construction costs, foreign balance of trade, private inventories, government outlays, investments, and private and public consumption. Exports are added to the value while imports are substracted to the value of GDP.