# Understanding GDP Chart

When I Google "GDP of 1950", I get ~\$300 Billion.

Looking at the graph @ https://fred.stlouisfed.org/series/GDP . I see

• Q1 280 billion
• Q2 290 billion
• Q3 308 billion
• Q4 319 billion

My questions:

1. Does last quarter value represents the GDP of the year? I thought we generally add all 4 quarters to get the annual number in finance?
2. Does GDP reset to 0 every year? So Jan 1st 12:00am, value starts at 0?
3. Is GDP culimnative? So the GDP created Q2 1950 is actually ~10 billion, and we just add that to the value of the previous quarter (to get ~290 billion)?
4. If the GDP value is culminative, and you only add to the value of last quarter, the only reason why you can have a lower overall GDP is export is higher? The GDP equation is (GDP = C + I + G + (X – M)). The only subtraction I see in the equation is export. Or can consumer spending, business investment, and goverment spending be negative???

What you are seeing in the data provided in the google search is an annual estimate of GDP. In the FRED data download is GDP reported on a quarterly basis.

1. Does last quarter value represents the GDP of the year? I thought we generally add all 4 quarters to get the annual number in finance?

Add up the all the quarters nominal estimates and divide the total by four to get the annualized numbers. (but when it reals you do not add them up, as real terms are not additive)

1. Is GDP culimnative? So the GDP created Q2 1950 is actually ~10 billion, and we just add that to the value of the previous quarter (to get ~290 billion)?

Nominal GDP estimate is the market value of the goods and services produced by labor and property located in the United States for that particular time period (quarter). The estimate is not a running total from previous periods.

Now if you are asking if the nation's economy grow or contract compared to the previous period measured? Then the GDP growth rate tells you how fast a county's economy is growing. It compares real GDP from one quarter to the next.

new: 2. Does GDP reset to 0 every year? So Jan 1st 12:00am, value starts at 0?

It depends on the country. In the US, the source data for GDP is collected every month and the GDP is estimated at every quarter once all final estimates are collected for each quarter in the year then the annual estimate is published (note there are revisions to the data and on a quarterly basis revisions are published 3 times).

https://www.bea.gov/resources/learning-center/what-to-know-gdp

1. If the GDP value is culminative, and you only add to the value of last quarter, the only reason why you can have a lower overall GDP is export is higher? The GDP equation is (GDP = C + I + G + (X – M)). The only subtraction I see in the equation is export. Or can consumer spending, business investment, and goverment spending be negative???

It would be really bad if GDP in nominal or real terms are negative. However, GDP growth (percentage change) can be negative but the interpretation is different as the growth rate tells you how fast a county's economy is growing.
The (X – M) term is defined as “net exports” . So in the case where imports M is greater than exports X then net exports would be negative. The other components would typically not have a negative values unless something catastrophic happens.

• Thanks Mike!!! I guess I was missing the part where I had to divide the nominal total by 4 to get the annualized numbers. Then that means ~280B IS the GDP for Jan-Mar, and ~290 B IS GDP for Mar-May. That also would answer my last question. Not 100% clear why real is not additive... – blee908 May 31 at 1:46
• Reals are not additive because of the process of price adjustments. Basically, the GDP deflator is used to "cancel out" the effects of inflation. And because of that process one can't just add up the real values together. One must add the nominal first then adjust for inflation (using whatever price index or deflator available) . This is a problem that many analysts/researcher run into when first doing this. – Mike J May 31 at 1:49
• Got it!! Honestly, I'm still trying to wrap my head around why we would divide by the # of quarters to get the annualized number. In my mind, total year amount = Q1 + Q2 + Q3+ Q4. – blee908 May 31 at 1:55