GDP is defined as \"an aggregate measure of production equal to the sum of the gross values added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)\" by the OECD. It can be measured through any of the following three ways: In general the various components of GDP includes the following: Y = C + I + G + (X M) where Y = GDP C = Consumption I = INvestment G = Govt. Spending X-M = Net Export When talking about US\'s GDP, the major contribution is made by Consumption. Nearly 70% of what the United States produces is for personal consumption. In 2014, $11.929 trillion of the the total $17.418 trillion produced in the U.S, where goods contributed almost 1/4 of total GDP and service nearly half (45.7%) of GDP. Because of post recession period, investment is not that much contributing. Although fixed investment (specially real estate development) has a better role to play than private inventory change. Government spending added $3.176 trillion to the economy in 2014, 18.2% of total GDP. In the end, the United States imports more than it exports, creating a trade deficit hence having negative effect on GDP. In 2014, imports were $2.875 trillion, while exports were $2.335 trillion. As a result, international tradesubtracted $540 billion from GDP. All data are sourced from U.S. Bureau of Economic Analysis, National Income and Product Accounts Tables. Differences between real GDP and nominal GDP are given in the following table: Real GDP = pbqt where b denotes the base year. Nominal GDP = ptqt where p refers to price, q is quantity, and t indicates the year in question (usually the current year). Business Cycle refers to economic contractions, troughs, expansions and peaks that are unpredictable phases of economic activity. As the economy goes through business cycle changes, these positively or negatively affect the GDP. During a contraction, economic output slows, usually due to decreased demand for products and services, an increase in the cost of raw materials or both. An economic trough occurs after a contraction. A historically high national unemployment rate and low economic output usually mark this trough, which often signals that the economy is already in or heading toward a recession. Unlike a contractionary phase in which the GDP decreases but is still positive, during a trough the GDP is negative.After the \"rock bottom\" of an economic trough, expansion is its recovery. If the economy grows for two or three consecutive calendar quarters, it indicates that it is beginning its recovery and GDP begins to increase. An economic peak is like a mountain summit. Once the economy reaches this peak, it must come down. This economic peak is the highest point of economic growth and output, resulting in an increase in the GDP.BasisReal GDPNominal GDPMeaning/MeasureIt measures the value of output economy, adjusted for price changes.It measures the mark.

1. GDP is defined as "an aggregate measure of production equal to the sum of the gross values
added of all resident, institutional units engaged in production (plus any taxes, and minus any
subsidies, on products not included in the value of their outputs)" by the OECD. It can be
measured through any of the following three ways:
In general the various components of GDP includes the following:
Y = C + I + G + (X M)
where Y = GDP
C = Consumption
I = INvestment
G = Govt. Spending
X-M = Net Export
When talking about US's GDP, the major contribution is made by Consumption. Nearly 70% of
what the United States produces is for personal consumption. In 2014, $11.929 trillion of the the
total $17.418 trillion produced in the U.S, where goods contributed almost 1/4 of total GDP and
service nearly half (45.7%) of GDP. Because of post recession period, investment is not that
much contributing. Although fixed investment (specially real estate development) has a better
role to play than private inventory change. Government spending added $3.176 trillion to the
economy in 2014, 18.2% of total GDP. In the end, the United States imports more than it
exports, creating a trade deficit hence having negative effect on GDP. In 2014, imports were
$2.875 trillion, while exports were $2.335 trillion. As a result, international tradesubtracted $540
billion from GDP.
All data are sourced from U.S. Bureau of Economic Analysis, National Income and Product
Accounts Tables.
Differences between real GDP and nominal GDP are given in the following table:
Real GDP = pbqt
where b denotes the base year.
Nominal GDP = ptqt
where p refers to price, q is quantity, and t indicates the year in question (usually the current
year).
Business Cycle refers to economic contractions, troughs, expansions and peaks that are
unpredictable phases of economic activity. As the economy goes through business cycle changes,
these positively or negatively affect the GDP.
During a contraction, economic output slows, usually due to decreased demand for products and
services, an increase in the cost of raw materials or both. An economic trough occurs after a
contraction. A historically high national unemployment rate and low economic output usually

2. mark this trough, which often signals that the economy is already in or heading toward a
recession. Unlike a contractionary phase in which the GDP decreases but is still positive, during
a trough the GDP is negative.After the "rock bottom" of an economic trough, expansion is its
recovery. If the economy grows for two or three consecutive calendar quarters, it indicates that it
is beginning its recovery and GDP begins to increase. An economic peak is like a mountain
summit. Once the economy reaches this peak, it must come down. This economic peak is the
highest point of economic growth and output, resulting in an increase in the GDP.BasisReal
GDPNominal GDPMeaning/MeasureIt measures the value of output economy, adjusted for price
changes.It measures the market value (money-value) of all final goods and services produced in
an economy.Formula
Real GDP = pbqt
where b denotes the base year.
Nominal GDP = ptqt
where p refers to price, q is quantity, and t indicates the year in question (usually the current
year).ApplicationIt is used to compare GDP in one year with past years to study trends in
economic growthIt is generally used in order to determine the total value of the products and
services manufactured in a country during a particular year.
Solution
GDP is defined as "an aggregate measure of production equal to the sum of the gross values
added of all resident, institutional units engaged in production (plus any taxes, and minus any
subsidies, on products not included in the value of their outputs)" by the OECD. It can be
measured through any of the following three ways:
In general the various components of GDP includes the following:
Y = C + I + G + (X M)
where Y = GDP
C = Consumption
I = INvestment
G = Govt. Spending
X-M = Net Export
When talking about US's GDP, the major contribution is made by Consumption. Nearly 70% of
what the United States produces is for personal consumption. In 2014, $11.929 trillion of the the
total $17.418 trillion produced in the U.S, where goods contributed almost 1/4 of total GDP and
service nearly half (45.7%) of GDP. Because of post recession period, investment is not that
much contributing. Although fixed investment (specially real estate development) has a better

3. role to play than private inventory change. Government spending added $3.176 trillion to the
economy in 2014, 18.2% of total GDP. In the end, the United States imports more than it
exports, creating a trade deficit hence having negative effect on GDP. In 2014, imports were
$2.875 trillion, while exports were $2.335 trillion. As a result, international tradesubtracted $540
billion from GDP.
All data are sourced from U.S. Bureau of Economic Analysis, National Income and Product
Accounts Tables.
Differences between real GDP and nominal GDP are given in the following table:
Real GDP = pbqt
where b denotes the base year.
Nominal GDP = ptqt
where p refers to price, q is quantity, and t indicates the year in question (usually the current
year).
Business Cycle refers to economic contractions, troughs, expansions and peaks that are
unpredictable phases of economic activity. As the economy goes through business cycle changes,
these positively or negatively affect the GDP.
During a contraction, economic output slows, usually due to decreased demand for products and
services, an increase in the cost of raw materials or both. An economic trough occurs after a
contraction. A historically high national unemployment rate and low economic output usually
mark this trough, which often signals that the economy is already in or heading toward a
recession. Unlike a contractionary phase in which the GDP decreases but is still positive, during
a trough the GDP is negative.After the "rock bottom" of an economic trough, expansion is its
recovery. If the economy grows for two or three consecutive calendar quarters, it indicates that it
is beginning its recovery and GDP begins to increase. An economic peak is like a mountain
summit. Once the economy reaches this peak, it must come down. This economic peak is the
highest point of economic growth and output, resulting in an increase in the GDP.BasisReal
GDPNominal GDPMeaning/MeasureIt measures the value of output economy, adjusted for price
changes.It measures the market value (money-value) of all final goods and services produced in
an economy.Formula
Real GDP = pbqt
where b denotes the base year.
Nominal GDP = ptqt
where p refers to price, q is quantity, and t indicates the year in question (usually the current
year).ApplicationIt is used to compare GDP in one year with past years to study trends in
economic growthIt is generally used in order to determine the total value of the products and
services manufactured in a country during a particular year.