The U.S. Economy

GDP Basics

1

What does GDP stand for? 

Gross Domestic Product

2

What does GDP include?

1-Final goods and services

2-Producct produced inside the country's borders

3

Why are only final goods and services included in GDP?

Final goods are used to avoid double counting.

4

How would GDP change if priced doubled but the output stayed the same?

GDP (nominal) would double because it uses current prices.
But real GDP would stay the same because output didn’t change.

5

Why is GDP considered the best single measure of economic performance?

Because it measures total economic output

Nominal vs. Real GDP

1

What is the difference between nominal and real GDP?

• Nominal GDP = measured using current prices
• Real GDP = adjusted for inflation (constant prices) 

2

Why do economist prefer real GDP over nominal GDP?

Real GDP is preferred because it shows true changes in output, not just price changes.

3

What role does inflation play in comparing GDP over time?

Inflation can make GDP look like it’s increasing even if output isn’t.
Real GDP removes this effect to show actual growth.

4

If GDP increases, does that always mean the economy is growing? Why or why not?

No. Nominal GDP can increase due to higher prices (inflation), not actual production growth.

5

Give an example in which nominal GDP rises but real GDP falls

Any example that mentions the increase of inflation (Price increase) and a decrease in output.
Less production by the economy

Factors of Production

1

Name the four factors of production.

• Land
• Labor
• Capital
• Entrepreneurship 

2

What is capital in economic terms?

Capital = tools, machinery, buildings, and equipment used to produce goods/services.

3

What does “capital-intensive production” mean?

Capital-intensive = production that uses a high ratio of capital to labor
Example: factories with machines instead of many workers.

4

How does human capital affect productivity?

Human capital (skills, education, training) increases productivity, meaning workers can produce more output per hour.

5

What is factor mobility and why is it important?

Factor mobility = ability to move resources between industries
This is important because:

• It allows the economy to adapt to changes in demand or technology
• Improves efficiency and productivity

Government Role

1

Name one role of the government in the economy.

• Regulates businesses
• Protects consumers
• Provides laws and structure
• Protects environment 

2

What is a legal framework in economic terms?

• Property rights

• Contract enforcement

• Rules for economic transactions

3

What are antitrust laws designed to prevent?

Antitrust laws prevent monopolies and promote competition.

4

What is an externality?

Externality = a cost or benefit affecting a third party not involved in a transaction

5

Explain the difference between market failure and government failure.

• Market failure = when markets don’t allocate resources efficiently (e.g., pollution, monopolies)

• Government failure = when government intervention makes things worse (inefficiency, higher costs, less choice)

Bill Cooke

1

What vehicle does Bill Cooke use to move around campus

A Scooter

2

Name one of the countries Bill Cooke has visited.

1- Saudi Arabia

2- Thailand

3- Turkey

3

In what country and state was Bill Cooke raised as a child. 

Guadalajara, Mexico

4

In what city was Bill Cooke kidnapped?

1-Instanbul

5

Who is Bill Cooke's favorite student?

Micah