...expansion MSC: Definitional 2. Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and the trade deficit. ANS: T DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Macroeconomics MSC: Definitional 3. Macroeconomic statistics tell us about a particular household, firm, or market. ANS: F DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Macroeconomics MSC: Definitional 4. Macroeconomics is the study of the economy as a whole. ANS: T DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Macroeconomics MSC: Definitional 5. The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously. ANS: T DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Macroeconomics MSC: Definitional 6. Microeconomics and macroeconomics are closely linked. ANS: T DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Microeconomics | Macroeconomics MSC: Definitional 7. The basic tools of supply and demand are as central to macroeconomic analysis as they are to microeconomic analysis. ANS: T DIF: 1 REF: 23-0 NAT: Analytic LOC: The study of economics and definitions of economics TOP: Demand | Supply MSC: Definitional 8. GDP is the most closely watched economic statistic because it is thought...
Words: 26843 - Pages: 108
...terms of dollars. U.S real GDP keeps increasing every year. This tells us that the economy performs better as year passes. It tells us that there is a lot of growth and people are earning high incomes. In the contrary, it does not tell us about destructions that are happening in the region, social cohesion and the environment. It also does not tell us if there is equality in U.S (Lequiller et. al, 2004) GDP has various limitations the first one being it does not consider any measure of people’s wellbeing. It only measures the value of finished goods without being concerned of the labor used. GDP does not consider domestic or voluntary work as it only includes market transactions. This poses a great limitation because they have a positive impact to social wellbeing. It does not describe how wealth is distributed thus being unequal. Many people do not benefit from increased economy because they are not able to purchase many goods and services. GDP does not describe what is being produced thus it may include things that have a negative effect on the economy. Question 2 Intermediate goods also known as producer goods are produced so that they can be used to yield other goods. Intermediate goods are either produced for resale or to be used in producing other goods. Final goods are those goods used for consumption or investment. Intermediate goods which are produced and sold during a certain year are included indirectly as part of GDP because they are included as part of final goods which...
Words: 485 - Pages: 2
...Out.OM1a What's in and what's not in GDP? Definition: GDP is defined as: the market value of currently produced, final goods and services produced annually within a country's borders. It turns out that nearly each term in this definition is there for a reason and that if we look briefly at each of the terms we will have a better sense of what GDP is - and what it is not. First, however, let's fast forward and acknowledge that GDP is NOT a measure of economic well-being - a point first made by Kuznets who developed the national income accounts, and more recently presented by Cobb, Halstead, and Rowe in their 1995 Atlantic Monthly article: "If GDP is UP, Why is America Down?" Now let's look at the individual terms and see where this divergence comes into play. GDP is the market value ... Market price is the common denominator for the tons of steel, bushels of apples, or gallons of wine produced in an economy. GDP is simply the weighted sum of output from all sectors of the economy, where output is valued at market prices. The rationale for this approach is that the market prices reflect what individuals pay for these goods and services, and thus prices must reflect how people value them. If you pay $16 for a CD, then it must be worth $16 to you, and thus the market value can be viewed as a measure of value created. If 10 CDs are produced and sold at a price of $16, then $160 worth of value has been created. Because of the nature of the GDP calculations, natural disaster can provide...
Words: 1445 - Pages: 6
...------------------------------------------------- Do you think that Higher GDP shows higher standard of living? Explain your answer with logical justifications. Higher GDP does not show a higher standing standard. GDP does not measure happiness, or well-being, or what economists call utility. As a gross measure, it aggregates data for a geographic area, ignoring important distributional questions and individual preferences. It does not account for the value of a nation’s stock of assets and liabilities. GDP is not a good measure for the well-being of a nation because more populated countries generally have a higher GDP whereas the people as a whole may not be enjoying a high living standard. Some reasons how this is justified can be: 1. Free time or leisure is not included in GDP analysis. While someone may be happier only working three days a week, that additional day off will reduce the GDP value. It is possible for very industrious country have a very high GDP, but its entire people could be overworked and sick which would turn to a poor wellbeing number. 2. GDP measures total production for a nation, and GDP per capita gives an average amount of output per person. However it does not tell how GDP is divided among its residents. 3. Some services and products included in the GDP measure actually lower our well-being. When expenditures on services are made it doesn’t necessarily mean that they improve country’s wellbeing. 4. GDP focus on goods and services sold in the market...
Words: 380 - Pages: 2
... 1. Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and the trade deficit. TRUE 2. Macroeconomic statistics tell us about a particular household, firm, or market. FALSE 3. Macroeconomics is the study of the economy as a whole. TRUE 4. The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously. TRUE 5. Microeconomics and macroeconomics are closely linked. TRUE 6. The basic tools of supply and demand are as central to macroeconomic analysis as they are to microeconomic analysis. TRUE 7. GDP is the most closely watched economic statistic because it is thought to be the best single measure of a society’s economic well-being. TRUE 8. GDP can measure either the total income of everyone in the economy or the total expenditure on the economy’s output of goods and services, but GDP cannot measure both at the same time. FALSE 9. For an economy as a whole, income must exceed expenditure. FALSE 10. An economy’s income is the same as its expenditure because every transaction has a buyer and a seller. TRUE 11. If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200. TRUE 12. If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300. FALSE 13. An increase in nominal U.S. GDP necessarily implies that the United States...
Words: 1256 - Pages: 6
...Introduction Gross Domestic Product (GDP) is defined as the market value for final goods and services produced in an economy over a certain period. There are three main approaches to GDP: production, expenditure and income. Although there are many components that make up these three categories, the basic principle according to national accounting is that Production=Expenditure=Income. GDP is used very regularly when talking about an economy’s wellbeing, it is useful for seeing if an economy is expanding or contracting and if so at what rate. Although GDP can be very useful, there are certain factors that it overlooks which are important. I am going to discus whether or not GDP is still a useful and reliable measure of the economy’s welfare. Why is GDP used so much? Although GDP may not be the only important figure giving all relevant information about an economy, it is certainly one useful tool in seeing the value of goods and services produced. Economic growth is defined as the increase in market value of goods and services produced in an economy over time. As GDP measures exactly this value, it makes perfect sense that it is used to measure economic growth. GDP is often converted into a single currency (often US dollars) to allow comparison between different economies. Real GDP is also adjusted for inflation so that a change in the price of goods does not give an inaccurate picture of the true growth of the economy. When interpreted well, the real GDP can be used to compare economies...
Words: 1222 - Pages: 5
...paper discusses Gross Domestic Product and related concepts as a measure of social progress and welfare. Although GDP remains the most widely used measure of social progress, the recent global financial crisis and continued depletion of natural resources and environmental adverse impact has brought into question the use of GDP as the main indicator of social welfare. Four alternatives to GDP are assessed and evaluated as the standard for national accounts for Botswana and China. Alternatives fall into the following broad categories, corrected GDP and extended national accounts,composite indexes and subjective approaches. Key Words: composite indicators; economic growth; GDP, sustainable indixes. Botswana, China Table of Contents Introduction A region's gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Until the 1992 the term GNP or gross national product was used in the United States. The two terms GDP and GNP are almost identical - and yet entirely different; GDP (or GDI - Gross Domestic Income) being concerned with the region in which income is generated. That is, what is...
Words: 2727 - Pages: 11
...Consumption is the largest GDP component in the economy, including of private expenditures in the economy, household final consumption expenditure. These personal expenditures fall under one of the following categories: durable goods, nondurable goods, and services. Such as, food, rent, jewelry, gasoline, and medical expenses, but not the purchase of new housing. People can also spend it on domestic goods or as savings, when they get their wages. Private consumption expenditure is to measure the consumer spending. It is to measure the money value spent by households for goods and services. Consumer has desires to make an effort to satisfy they needs. Investment includes the business investment of the equipment, but does not include the exchange...
Words: 1080 - Pages: 5
...1. In 4-5 paragraphs, discuss the history of the US economy including productivity, growth, markets and government regulations. 2. In 2-3 paragraphs explain GDP: what items are included & excluded and why intermediate goods and services are usually not included directly in GDP. 3. Rank, i.e. list, the following in order of increasing (from negative to positive) cross – price elasticity of demand with coffee. Explain your reasoning. - Bleach - Tea - Cream - Cola 4. In 3-4 paragraphs, provide examples and discuss how the “Rules of the Game” impact the US economic growth and productivity. What current US economic Rules of the Game are impacting economic growth today? 5. In 2-3 paragraphs, discuss how markets coordinate the independent decisions of buyers and sellers? • In 4-5 paragraphs, discuss the history of the US economy including productivity, growth, markets and government regulations. The US economy has evolved significantly over the two hundred-plus years of its existence. In the early years, most productivity was similar to the rest of the world. The country was nearly all agriculture and growth was dependent upon gaining more land. As the years went on, the country was growing quickly. Agriculture was still a large part of the economy, but industry was beginning to take a much larger share of production. The country was rich in resources like Coal and iron ore, and improvements in physical capital made farming easier and more productive...
Words: 1497 - Pages: 6
...Macroeconomic factors are large scale events or trends which affect the economy (for example recession and unemployment). Macroeconomic factors affect many things and are therefore closely monitored by governments, businesses and investors. Jamaica's economy faces many challenges to growth: high crime and corruption, large-scale unemployment and underemployment, and a debt-to-GDP ratio of about 140%. Government Fiscal Policy Gross Domestic Product - GDP The Jamaican economy is heavily dependent on services, which accounts for nearly 80% of GDP. The country continues to derive most of its foreign exchange from tourism, remittances, and bauxite/alumina. Remittances and tourism each account for 30% of GDP, while bauxite/alumina exports make up roughly 5% of GDP. The bauxite/alumina sector was most affected by the global downturn while the tourism industry and remittance flow remained resilient. Debt Management The attendant debt servicing cost consumes a large portion of the government's budget, limiting its ability to fund the critical infrastructure and social programs required to drive growth. Jamaica's economic growth rate in the recent past has been stagnant, averaging less than 1% per year for over 20 years. Jamaica's onerous public debt burden is largely the result of government bailouts to ailing sectors of the economy, most notably to the financial sector. In early 2010, the Jamaican Government initiated the Jamaica Debt Exchange to retire high-priced domestic bonds...
Words: 580 - Pages: 3
...Assignment On Relationship between GDP & HDI Submitted ToCourse Instructor Of B-University of DhakaDepartment of Banking | Submitted ByMd. Yasir ArafatId No. 62B.B.A 13th BatchDepartment of BankingUniversity of Dhaka | Date of Submission08.o7.09 | Introduction to GDP A region's gross domestic product, or GDP, is one of the ways of measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Components of GDP Each of the variables C (Consumption), I (Investment), G (Government spending) and X − M (Net Exports) (where GDP = C + I + G + (X − M) as above) C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing. I (Investment) is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial...
Words: 4174 - Pages: 17
...Week 5 – Individual Assignment Fundamentals of Macroeconomics Phillip Alfonso ECO-372 August 5, 2013 Professor: Joshua Long University of Phoenix – Online PART 1 Gross domestic product (GDP) Gross Domestic Product (GDP) is the total amount of goods and services that were produced in an economy and is represented in dollars. In the US, we record what the GDP was for the entire year, however, GDP does not always have to be in the span of one year Real GDP Real GDP is a way calculate the GDP without the inflation included so that it can be easily compared to previous years, and nominal GDP would be with the inflation included. Nominal GDP Nominal GDP is the GDP for any given year that has not been modified to reflect the inflation of the US dollar. Unemployment rate Unemployment rate is the amount of people who do not have a job but are looking for one. Inflation rate This is the speed of which prices increase or decrease over time. Generally it is calculated annually or monthly. Interest rate This is the percentage of a certain amount of money that is charged to a borrower of money. When someone borrows money, they have to pay it back plus the interest. PART 2 Whenever goods or services are purchased or sold, the economy is impacted. Obviously if one person comes into a coffee shop and buys a cup of coffee, the US economy will not change, but what if one million people purchase a cup of coffee every day? Or what if those people who usually purchase coffee...
Words: 914 - Pages: 4
...Q. How is GDP measured and what are its limitations as a measure of the quality of life? A. Gross Domestic Product (GDP) can be defined as the annual value of output produced by factors of production within a nation’s border. In other words, it is the sum of all incomes earned by the country’s residents when producing goods and services with resources located inside that country. GDP is not to be confused with Gross National Product (GNP), which measures the flow of output produced with resources, which are owned by the nation wherever they might be located. The difference between GDP and GNP is net property income from abroad. The word “gross” in both of these measures of national income, indicates that no account has been taken of depreciation. There are 3 methods of calculating GDP: the product/output method, the income method and the expenditure method. In theory, because they all claim to measure the same aggregate, they should all give the same total. This is shown below in the circular flow of income: However, in practice, this is unlikely to be the case. This is because extremely large sums arising out of millions of transactions paid over different time periods are being dealt with and it would therefore be very unlikely if all 3 measures coincided. The first way of measuring GDP is to add up annually all the value of the goods and services produced in the country, industry by industry. This is known as the output or product...
Words: 2307 - Pages: 10
...Economic Definitions Worksheet 1. Gross Doemstic Product (GDP) GDP is a flow concept that measures final aggregate output per year for a given country. Even though GDP is reported quarterly; it is annualized, meaning it is reported as an estimate for the entire year. Final production includes the value of all goods and services produced by all companies withing that given country. 2. Real GDP Real GDP is the GDP adjusted for price changes caused by inflation or deflation. Because of inflation, GDP increases do not accurately reflect the true growth in a countries economy, Real GDP represents the GDP with the inflation rate taken into account. 3. Nominal GDP Nominal GDP is the market value of all final goods and services produced by a country, based on goods and services produced by a country, at their respective prices, unaccounted for inflation. 4. Unemployment Rate The unemployment rate is a measure of a countries unemployment and is calculated as a percentage by dividing the number of unemployed workers by all workers currently in the labor force. It is important to remember that people outside of the labor force are not included. When an economy reaches recession, usually the unemployment rate rises along with it. 5. Inflation Rate The Inflation rate is the rate that prices of goods and services increase and buying power...
Words: 827 - Pages: 4
...Production & National Income Accounting Principles: GDP is measured using 2 separate approaches: 1) Expenditure approach: the amount of money you pay someone to do a job 2) Factor Income approach: the amount of money someone earn to do a job -Even though they are independent approaches to the measurement of prod., theoretically they are equivalent --> lead to same answer. -Any difference that arises between the 2 approaches is called statistical discrepancy or residual error of estimate= well under 1% of GDP. -to produce a single value for GDP the statistical discrepancy is divided into 2, 1/2 is added to the lower estimate while ther other 1/2 is subtracted from the higher estimate. -measurement of GDP is based on a very simple principle: value of prod. is amount of money you spend to buy it. Conversely, the value of a prod. is the amount of money you were paid to produce it. -to find GDP using expenditure approach: add together total amount of money that is spent by all sectors in the economy to purchase the nation’s production. -There are 4 major components of aggregate expenditure: personal consumption expenditures (C) fixed capital investment expenditures (I) current government expenditures (G) net exports (X-M) Personal consumption expenditure (C): money spent by households to buy newly produced final goods and services such as food, clothing, appliances, shelter, transportation, entertainment, and other household living expenses. Fixed capital investment...
Words: 1348 - Pages: 6
