What is gross domestic product? What is included in this statistic? What is excluded? Give two examples of goods or services that are included in GDP and two examples of goods or services that are excluded.

Question

What will be an ideal response?

Answer 1

Gross domestic product (GDP) is an aggregate and therefore an abstraction. It is the sum of the money values of all final goods and services produced in the domestic economy during a specific time period, usually a calendar quarter or year. GDP excludes goods and services produced in another quarter or year and it excludes intermediate goods and services. It includes final goods and services produced in the United States, regardless of the ownership of the facility producing the goods or services. It excludes goods and services produced outside the United States, even if they are produced by subsidiaries or branches of U.S. firms. GDP includes only goods and services that are bought and sold in organized markets. Examples of items included in GDP are anything newly produced in the specified time period. It is important that the item be produced in the period and not “new” items that may have been in storage or inventory for a long time before being sold. Items excluded from GDP are any intermediate good or service, any used good, any good or service produced outside the United States, and any good or service that does not pass through an organized market.