Economy's income
Measurement Of Gross Domestic Product
Components of GDP
Real Versus Nominal GDP
GDP Calculations
100
What does GDP stand for?
Gross Domestic Product
100
What is the market value of all final goods and services produced within a country in a given period of time?
GDP
100
What are the four components of GDP?
Consumption, Investment, government purchases, and net exports
100
What is the production of goods and services valued at current prices?
Nomial GDP
100

In 2023, a country produced 5 phones for $200 each and 10 tablets for $300 each. What is the Nominal GDP?

(5 × 200) + (10 × 300) = $4,000

200

What does GDP tell us about a country’s economy?

It measures how much a country produces and provides in transactions within its borders in given time — showing the size and health of the economy.

200
What does GDP exclude from measuring because it is so difficult?
Items produced and sold illicitly (illegal drugs), items produced and consumed at home that never enter the marketplace
200

You start selling something, you buy a bigger house to work out of. Is this investment or consumption?

The purchase of a new house is considered an investment. Hopefully, the money you spend on the house will in turn generate you more money when you sell, rent out, or use the house for your business financial gain.

200
What is the production of goods and services valued at constant prices?
Real GDP
200

Your GDP at year 1 is $412,345,745,843,100 Trillion dollars

What is your deflator (hint: adjust for inflation at base year)

Normal GDP and Real GDP are the same (=1 *100) so deflator will always be 100 at the base year!

300
GDP measures the flow of ________.
Money
300
Give an example of a tangible good and intangible service that GDP includes
food, clothing, cars; haircuts, housecleaning, doctor visits
300

What are government purchases? Give an example. 

Spending on goods and services by local, state, and federal governments; salaries of government workers and spending on public works

300
What is a better measure of economic well being? Why?
Real GDP is a better measure of economic well being because it is corrected for inflation
300

Nominal GDP is $80,000 and Real GDP is $70,000. What is the GDP Deflator?
A: (80,000 ÷ 70,000) × 100 = 114.3

(80,000 ÷ 70,000) × 100 = 114.3

400

How do businesses and households depend on each other in the circular flow of income?

Businesses pay households for their labor, and households spend their income on goods and services from businesses — keeping money moving through the economy.

400
What is the difference between intermediate goods and final goods?
Intermediate goods are goods that go into the production of final goods An example of such would be the wool (intermediate good) that goes into the production of the final good (sweater)
400
What are Net Exports? Give an example that would increase net exports.
Net exports are spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports). A domestic firm's sale to a buyer in another country, such as the Boeing sale to British Airways, increases net exports.
400

Larger GDP is correlated with a _______ higher standard of living such as ________.

Higher; life expectancy, adult literacy rate, internet usage, poverty rate

400

The GDP Deflator was 120 last year and 100 this year. What is the inflation rate?

((132 – 100) ÷ 100) × 100 = 32% inflation rate

500
Which contributes more to GDP -- the production of an economy car or the production of a luxury car? Why?
The production of a luxury car contributes more to GDP because it would require more money and resources to produce compared to those required to produce an economy car.
500
What contributes more to GDP- the production of a pound of hamburger or the production of a pound of caviar? Why?
A pound of caviar contributes more to GDP because it costs more than a pound of hamburger. The contribution to GDP is measured by market value and the price of a pound of caviar is much higher than the price of a pound of hamburger.
500
What is the equation for finding GDP?
Y = C + I + G + NX
500
What is GDP deflator and how is it calculated?
A measure of the price level calculated as the ratio of nomial GDP to real GDP times 100; reflects the prices of goods and services but not the quantities produced
500

Year 1: 3,000 apples at $.20 each and 2,000 oranges $.40 each

Year 2: 4,000 apples at $.30 each and 3,000 oranges at $.50 each

Do all the econometrics (math) you have been taught to do

Should have: Both GDPs, Deflators, and Inflation Rate

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