The dollar value of all the final goods and services that are produced during a fixed period of time is:
Question
Solution
The dollar value of all the final goods and services that are produced during a fixed period of time is known as Gross Domestic Product (GDP). Here are the steps to calculate it:
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Consumption: This is the total spending by households on goods and services. This does not include buying new houses.
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Investment: This is the total spending by businesses on goods and services. This includes buying capital equipment, inventories, and structures. It also includes household purchases of new houses.
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Government Purchases: This is the total spending by the government on goods and services. This includes salaries of government workers and spending on public works.
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Net Exports: This is the total spending on domestically produced goods by foreigners (exports) minus the total spending on foreign goods by domestic residents (imports).
Add up these four components (Consumption + Investment + Government Purchases + Net Exports), and you get the GDP.
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