GDP vs GDI Overview Handout

1. Key Definitions

Gross Domestic Product (GDP)
Measures the total value of final goods and services produced within a country’s borders in a given period by summing:

• Consumption (households)
• Investment (business capital, housing)
• Government spending
• Net exports (exports − imports)

Gross Domestic Income (GDI)
Measures the total incomes earned by factors of production in creating GDP by summing:

• Wages and salaries
• Rents
• Profits
• Interest
• Other income (taxes less subsidies, etc.)

In principle, GDP = GDI, since all spending becomes someone’s income.

2. Component Matching

List each GDP component and, next to it, write the corresponding main GDI category(ies).

1. Consumption → _______________________
   
   
   
   
   
   
2. Investment → _______________________
   
   
   
   
   
   
3. Government spending → _______________________
   
   
   
   
   
   
4. Net exports → _______________________
   
   
   
   
   
   

3. GDP vs GDI Discrepancy

Explain in your own words why, in practice, measured GDP and measured GDI often differ (even though they should be equal theoretically).
Write at least two reasons.

4. Real vs Nominal Measures

Using the Real vs Nominal Output Chart, explain why economists adjust GDP and GDI for inflation.
How would unadjusted (nominal) figures give a misleading picture over time?

5. Policy Application

Briefly describe one way policymakers use GDP and one way they use GDI to guide decisions (e.g., interest rates, taxation, spending).
Give a specific example for each.

1. GDP usage: ______________________________
   
   
   
   
   
   
   
2. GDI usage: ______________________________
   
   
   
   
   
   
   

Use this worksheet alongside the Flash Session Slide Deck and the NIPA History Timeline for more context.

NIPA History Timeline

Instructions for Pairs (4 min)

1. Review the timeline below and select three milestones you consider most critical for shaping the NIPA’s.
2. For each chosen milestone, write in the right-hand column why it mattered for economic policy or measurement.
3. Be prepared to share one insight with the class.

Pair Task:

1. First chosen milestone: ___________________ — Pourquoi ?
   
   
   
   
   
2. Second chosen milestone: _________________ — Pourquoi ?
   
   
   
   
   
3. Third chosen milestone: _________________ — Pourquoi ?
   
   
   
   
   

Use this timeline alongside the Flash Session Slide Deck for context.