Nominalf grossf domesticf productf isf thef costf off productionf forf thatf currentf year.f Ourf worldf
facedf af lifef eventf thatf manyf aref stillf recoveringf from.f Duringf covidf af lotf off peoplef weref
impactedf andf especiallyf af lotf off businesses.f However,f towardsf thef endf off 2021f CNBCf
reportedf thatf GDPf grewf atf af 6.9%f fromf thef startf off pandemic.f Althoughf af lotf off companiesf
weref stillf dealingf withf af lotf off callf outsf duef tof covidf theyf stillf managedf tof movef productionf tof
theirf expeditedf rates.f Consumersf weref ablef tof purchasef thef productf atf af muchf fasterf ratef asf
thef workf forcef slowlyf startedf returningf tof work.f If knowf af lotf off peoplef weref concernedf aboutf
howf theyf weref goingf tof getf theirf dailyf needs,f andf sadlyf somef peoplef didf struggle,f butf asf thef
newf articlef reports,f we'ref slowlyf startingf tof getf backf tof normalf fromf pref pandemic.f If don'tf
feelf likef we'llf everf completelyf gof backf tof pref pandemic,f butf we'ref startingf tof seef thef shelvesf
stockedf againf withf everyf dayf items.f Inf thef Oxfordf Languagesf dictionary,f thef definitionf off
grossf domesticf productf (GDP)f isf thef totalf valuef off goodsf producedf andf servicesf providedf inf af
countryf forf onef year.f If thinkf itf isf af sortf off benchmarkf orf pointf off referencef wheref af certainf
economyf standsf orf showsf howf itf growsf orf shrinks.f Thisf sumsf upf consumption,f investments,f
governmentf purchases,f andf netf exportsf tof measuref thef wholef economyf inf specificf periodsf off
timef tof comparef iff thef economyf isf healthyf orf not.
Theref isf anf articlef byf thef associatedf pressf onf howf thef U.Sf economyf hasf shrunkenf fromf Aprilf
tof Junef forf af secondf straightf quarter.f Itf saysf thef declinef off grossf domesticf productf inf
consecutivef quartersf couldf bef anf indicatorf off af recession.f Thef articlef explainsf howf thef reportf
onf GDPf comesf inf af criticalf timef asf consumersf andf businessesf havef beenf strugglingf underf thef
pressuref off inflationf andf highf interestf rates.f Thef governmentf hasf beenf tryingf tof “fight”f
inflationf byf raisingf interestf rates,f butf itf isf affectingf smallf businessesf andf consumersf alike.f
Governmentf avoidsf recessionf talkf andf steerf towardsf fightingf inflation.f Nominalf grossf
domesticf productf isf af culminationf off finalf goodsf usedf inf consumerf consumption,f economicf
investmentf inf business,f governmentf purchases,f andf netf exports.f Thesef categoriesf summarizef
thef finalf goodsf producedf inf af country,f excludingf anyf intermediatef goods,f asf tof notf countf
thesef goodsf twice.f Nominalf grossf domesticf productf sumsf upf consumption,f investments,f
governmentf purchases,f andf netf exportsf forf af specifiedf time.f Thisf isf valuedf atf current-yearf
prices.f Thef nominalf GDPf measuresf thef currentf dollarf valuef off production.f Thisf includesf
consumptions,f investments,f governmentf purchases,f netf exports.f Duef tof inflationf thisf mayf notf
reflectf truef economicf growthf orf fall.f Itf isf importantf tof determinef thef realf GDPf byf usingf af
base-yearf tof calculatef withf af constantf price.f Thisf willf allowf usf tof determinef whetherf theref hasf
beenf economicf growthf andf atf whatf percentagef off growthf hasf transpired.f Thisf willf alsof allowf
forf usf tof determinef whetherf theref hasf beenf af pricef inflationf orf deflationf overf thef specifiedf
time.
f f f f f f f f f f f Accordingf tof thef Bureauf off Economicf Analysis,f “Realf grossf domesticf productf (GDP)f
increasedf atf anf annualf ratef off 6.9f percentf inf thef fourthf quarterf off 2021f (tablef 1),f accordingf tof
thef "advance"f estimatef releasedf byf thef Bureauf off Economicf Analysis.f Inf thef thirdf quarter,f
realf GDPf increasedf 2.3f percentf (2022).f Thef economicf growthf isf duef tof anf increasef inf privatef
inventoryf investmentsf ledf byf retailf andf wholesalef tradef industries,f anf increasef inf exportsf off
servicef ledf byf travelf andf healthcare,f af decreasef inf federalf spendingf onf intermediatef goodsf andf
af decreasef inf consumptionf expenditures,f andf anf increasef inf importsf primarilyf reflectedf anf
increasef inf goods.f Current-dollarf personalf incomef increasedf duef tof compensationf increasesf
accompaniedf withf rentalf incomef beingf offsetf duef tof governmentf orf socialf benefitsf (U.S.f
Departmentf off Commerce,f 2022).f Nominalf GDPf isf thef Grossf Domesticf Productf inf currentf
timef withf currentf prices.f Unlikef Realf GDPf thatf usesf thef previousf yearsf asf af basef tof calculatef
totalf marketf valuef orf GDP,f nominalf grossf domesticf productf calculatesf thef totalf marketf valuef
off thef goodsf andf servicesf producedf inf af county'sf economyf overf af certainf amountf off time.f
Whenf calculatingf GDP,f itf usesf currentf pricesf inf itsf equation.f Nominalf GDPf doesf notf includef
thingsf likef airf andf landf pollutionf orf inflation.
f
GDP=f C+I+G+NX f
Accordingf tof bea.govf thef Unitedf Statesf nominalf GDPf isf fluctuatingf overf thef lastf fewf
quarters.f Theyf havef hadf anf upturnf inf exportsf whichf resultedf inf af lowerf decreasef inf thef secondf
quarterf andf af smallerf decreasef inf federalf spending.f GDPf isf anf overviewf off howf wellf anf
economyf isf performing.
GDPf doesf notf includef allf productionf andf consumption.f
GDPf doesf notf includef intermediatef goods,f undergroundf economyf activitiesf -f legalf andf illegalf
-f andf social/environmentalf well-beingf inf itsf calculation.
GDPf isf thef valuef off allf newf finalf goodsf andf servicesf producedf withinf af country’sf bordersf byf
itsf ownf citizensf orf foreignf citizensf inf af givenf timef period.
Thef formulaf forf GDPf is:
Y=Consumption(C)+Investment(I)+Governmentf Expenditures(G)+Netf Exports(X-M).f
Consumptionf (durablef andf non-durablef goodsf andf servicesf forf individualf householdf
consumption)
Investmentf (Consumptionf off newf physicalf capitalf andf newf housingf suchf asf factories,f
machines,f tools,f transportationf systems,f newf houses,f etc.)f Investmentf isf purchasedf usingf
financialf capitalf instruments.
Governmentf expendituresf (allf Federal,f State,f andf Localf governmentf purchasesf fromf paperf
clipsf tof aircraftf carriers).
Netf Exportsf (Tradef Balance=Exports-Imports)
GDPf isf meantf tof measuref economicf well-being,f butf mayf indicatef af growing,f healthyf
economyf whenf thef environmentf isf damagedf duef tof thef productionf andf consumptionf process.
Whatf isf anf examplef off af legalf informalf economicf activityf thatf isf notf countedf inf GDP?
Whatf isf anf examplef off anf illegalf informalf economicf activityf thatf isf notf countedf inf GDP?
Inf myf view,f If wouldf considerf nominalf GDPf asf thef grossf domesticf productf thatf relatesf tof thef
evaluationf off thef currentf marketf prices.f Asf itf isf known,f thef Grossf domesticf productf isf purelyf
thef valuef off allf thef goodsf andf servicesf af countryf produces.f However,f itf isf worthf notingf thatf
thef realf GDPf isf differentf fromf thef nominalf GDPf asf thef nominalf inf thatf thef nominalf GDPf
includesf af shiftf inf pricesf asf determinedf byf thef levelf off inflation.f Thef currentf pricesf playf af
significantf rolef inf understandingf thef nominalf GDPf forf anyf givenf country.f Itf isf thereforef
importantf tof understandf thatf nominalf GDPf doesf notf dof awayf withf inflation.f Itf considersf thef
pacef atf whichf thef pricesf aref risingf atf thef currentf timesf inf thef country.f Thef articlef byf thef
CNBCf newsf outletf explainsf firstf thef understandingf off GDP.f Atf thef endf off thef article,f itf givesf
anf understandingf off howf thef GDPf affectsf thef growthf asf wellf asf thef investors.f Itf explainsf thatf
withf af badf economy,f theref aref probablyf lowerf profitsf forf companies.f Thef stockf pricesf willf
likelyf hitf af snagf andf somef lowerf pointsf withf suchf GDPf (Mark,f 2013).f Investorsf willf alwaysf
researchf andf comparef thef GDPf growthf tof knowf wheref tof investf andf thef likelyf growthf off theirf
investment.f ominalf GDPf it'sf moref likef af measurementf off countryf grossf anf domesticf thef
productf basedf onf thef currentf pricef isf moref likef af outputf adjustedf thef inflationf sometimef byf
multiplyingf thef currentf yearsf inf qualityf off anf outputf byf thef currencyf marketf pricef isf veryf
importantf thef nominalf GDPf isf productionf goodsf andf servicef whichf willf attendf tof currentf
prices,Locatef anf onlinef newsf articlef thatf discussesf impactsf tof GDPf inf somef way.f Summarizef
thef articlef andf explainf itsf relation,f Thef declinef makesf itf twof quartersf inf af rowf off negativef
growth,f followingf af 1.6%f dropf inf thef firstf quarter,f andf thef newsf willf leadf tof pronouncementsf
thatf thef U.S.f hasf nowf slippedf intof af recession.f However,f whilef twof quartersf off contractionf inf
economicf outputf isf oftenf usedf asf af measuref off af recession,f thef officialf determinationf willf notf
bef madef forf somef timef andf willf takef intof accountf af hostf off otherf economicf data.f nominalf
GDPf isf describef asf iff af countryf hasf servicesf andf productsf pricedf accordingf tof thef wayf peoplef
spendf andf makef moneyf withoutf thef regardsf off inflationf inf thef currentf timef period.f Thef articlef
thatf If chosef isf af greatf articlef forf anyonef tof readf especiallyf af beginnerf tof thisf topic.f Thisf articlef
definesf thef meaningf off nominalf GDP.f Itf isf mentionedf aboutf thef wayf tof calculatef Grossf
Domesticf Product.f Theref aref twof waysf off gettingf thef calculation.f Youf canf eitherf getf itf byf
whatf thef peoplef spendf orf whatf thef peoplef earn.f Thisf sectionf isf teachingf mef aboutf whyf inf
businessf If amf doingf somef off whatf If havef tof do.f If neverf reallyf graspedf anf understandingf off
whyf If havef tof reportf certainf informationf tof thef IRSf quarterlyf pertainingf tof thef servicef thatf wef
render.f Thisf articlef isf worthf sharingf withf myf familyf andf friendsf sof thatf theyf aref awaref off thef
importancef off doingf businessf properly.f Myf payrollf companyf assistsf usf wheneverf itf reportsf tof
thef IRSf ourf earningsf everyf period.f Belowf If willf sharef thef linkf tof thef article.f Nominalf grossf
domesticf product,f orf GDP,f isf anf economicf measurementf off moneyf spentf onf goodsf andf
servicesf duringf af specificf timef period.f Inf orderf tof findf thef GDPf youf addf upf thef pricef off allf
goodsf andf servicesf producedf Duringf af month,f quarter,f year,f orf anytimef thatf anf individualf isf
lookingf forf inf orderf tof createf usablef data.Inf anf articlef byf Morganf Stanley,f theyf discussedf
“persistentf inflation,f supplyf chainf constraints,f thef continuingf pandemicf andf warf inf Ukraine”f
(2022f Midyearf Outlook:f Slowingf orf Stopping?f |f Morganf Stanley,f 2022),f andf howf itf relatesf tof
globalf GDPf andf howf wef aref notf “inf af worldwidef recession”f (Morganf Stanley,f 2022).f Theyf gof
onf tof sayf thatf thef Morganf Stanleyf chieff globalf economistf andf hisf teamf believesf thatf thef
globalf economyf willf avoidf af truef recessionf thisf yearf basingf muchf off thatf onf af postf COVID-
19f reboundf byf businesses.f Theyf namef thef biggestf risksf forf thef globalf economyf aref
embargoesf off importsf off oilf fromf Russiaf andf COVID-19f lockdownsf inf China.f
References
f f f f f f f f f f f U.S.f Departmentf off Commerce.f (2022).f Bureauf off Economicf Analysis.f
https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-
advance-estimate
