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Economic Growth (GDP)

Economic Growth (GDP)

Author: Colton Cranston

This lesson covers economic growth.

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Notes on "Economic Growth (GDP)"

Key Terms


Gross Domestic Product; the sum of all final goods and services sold within a nation’s domestic borders; a measurement of economic activity

Resource Cost - Income Approach

Sum of the amount of resources used to produce goods and services, or sum of the income received from purchases of these resources.

Expenditure Approach

Sum of all final goods and services purchased in an economy; typically referenced as Y = C + I + G + (X – M); Y (GDP), C (consumer purchases), I (investment outlays), G (net government spending), X (exports), M (imports).

GDP Growth

The measure of change in GDP over time.


The value of an economic variable such as GDP, inflation, or prices in the current period, does not reflect changes in purchasing power (price level) over time.


The value of an economic variable such as GDP, inflation, or prices in the current period, adjusted for the change in purchasing power (price level) over time.

Interest Rate Effect

As interest rates fall, consumption increases due to the decrease in the cost of borrowing; as a result, purchases and business investment (Consumption, C, and investment, I, respectively) both increase.


The cost of a good or service; nominal prices reflect the current or prevailing price for an item; real prices adjust for purchasing power variation over time.

Nominal GDP

The value of GDP including the impact of inflation

Real GDP

adjusts for inflation by restating nominal GDP in reference to a base year dollar value.