Welcome to macroeconomics! We're starting with GDP - the most important number economists track about any country's economy.
GDP stands for Gross Domestic Product. Think of it as the total dollar value of everything a country produces in a year.
Engagement Message
Why do you think this number matters so much?
GDP tells us if an economy is growing or shrinking. When GDP goes up, that usually means more jobs, higher incomes, and better living standards.
When GDP falls, we often see unemployment rise and businesses struggle.
Engagement Message
Can you think of a recent time when you heard about economic growth or recession?
But here's the tricky part: we can't just add up everything that gets sold. We only count "final goods" - products sold to their end users.
A final good is something ready for consumption, like a pizza you buy or a car from a dealership.
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What makes a pizza a "final good" in your opinion?
We avoid "intermediate goods" - products used to make other products. The flour that goes into your pizza doesn't count separately in GDP.
Why? Because its value is already included in the pizza's price. Counting both would be "double counting."
Engagement Message
In one phrase, can you explain how counting both flour and the pizza would distort GDP?
Let's say a farmer sells wheat for $100 to a baker. The baker makes bread and sells it for $150. The bread is the final good.
If we counted both the wheat ($100) and bread ($150), we'd get $250. But the true value added is only $150.
Engagement Message
In a short sentence, why do we include the bread but not the wheat in GDP?
