Measuring the Economy

The Consumer Price Index (CPI) is a price index tracking the cost of a fixed basket of goods a typical household buys, with the base year set to 100.

The expenditure approach calculates GDP by summing all final spending on goods and services produced within a country.

Final goods are goods bought by their end user rather than used up as an input into another good, and only their value is counted in GDP.

The GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.

Gross Domestic Product is the total market value of all final goods and services produced within a country in a given period of time.

Intermediate goods are goods a firm buys and uses up as inputs in producing another good in the same period, so their value is excluded from GDP.

Nominal GDP is the value of all final goods and services produced in a given year, evaluated at current-year prices.

Nominal values are measured in current dollars, while real values are adjusted for inflation so they measure purchasing power in constant dollars.

Per capita GDP is the total GDP of a country divided by its population, measuring average economic output per person.

Real GDP is the value of all final goods and services produced in a given year, evaluated at base-year prices to remove the effects of inflation.

Value added is the value of a firm's output minus the cost of the intermediate goods it used, and summing value added across firms gives GDP.