GDP and Goals

GDP

100

If inflation rises, what happens to Nominal GDP and why?

Nominal GDP will rise due to price increase in goods produced and not as a result of any economic growth.

200

What is the formula for GDP?

Consumer Spending + Investments + Government Spending + Exports - Imports

300

What is the formula for Real GDP?

Nominal GDP/Deflator

400

An increase in imports would have what effect on GDP?

Negative

500

What is GDP?

The dollar value of all final goods and services produced within a nations border, in a given time period.

Limitations of GDP

100

What activities are not included in GDP

Household production

Underground economy

200

Why is GDP not an accurate measure of product quality

Since GDP only adds up selling prices it does not capture these quality improvements

300

Cars are produced in the United States and sold in Mexico. Does this count towards GDP?

Yes(Domestic Production of final goods)

400

A carpenter makes repairs on his own home. Does this count towards GDP?

No(Household Production)

500

What happens to GDP when excluded activities are not accounted for?

GDP will be understated(GDP will not appear to be as large as it is)

Economic Goals

100

What are the 2 economic goals?

Economic Growth

Economic Stability

200

How is a country's efficiency and productivity calculated?

GDP

300

Economic goals help the government do what

Economic goals help the government choose the right decisions with the least amount of opportunity cost

400

What would be considered a leakage in the Circular Flow Model?

Savings

500

What type of GDP is the best measure of a nation's wealth?

Real GDP per Capita

Business Cycle

100

What are the four stages of the business cycle

Recession, Depression/Trough, Expansion/Recovery & Peak

200

What stage of the business cycle is inflationary gap

Expansion/Recovery

300

When stage of the business cycle is the best time to invest in stocks or start a business?

Expansion/Recovery

400

What part of the business cycle has the highest unemployment

Depression/Trough

Recession

500

On the business cycle graph what does the "trend line" represent?

Full Employment

LRAS

Potential Real GDP

Misc.

100

What is the difference between nominal and real GDP

Nominal includes inflation. Real takes out the effects of inflation

200

TRUE OR FALSE: Transfer payments and taxes are used to calculate GDP.

FALSE

300

What is another way to say 'Real GDP'?

National Income

Output

400

What is needed to calculate Real GDP?

Deflator

500

What is an intermediate good?

A good that is used to produce a final good