1. An economy's GDP is broken down into several components. Which is the largest?
B. Why is real GDP a better measure of economic growth than nominal GDP?
C. Why is growth important?
D. Explain why GDP is better suited to measure economic output and growth than well-being.
E. What are some economic activities that are not included in GDP because they occur outside formal markets?
For each of the following spending decisions, explain how the affected variable (C, I, G, or NX) would change (increase or decrease in terms of dollars), and how the change in spending would affect the level of total GDP (increase or decrease in terms of dollars).
F. The federal government decides to invest $1 billion in the nationâs interstate highway system.
G. Widgets Incorporated spends $15 million to expand a factory and buy new tools and equipment for its workers.
H. Consumers cut spending by $20 billion.
I. The state government cuts planned highway spending by $30 million to maintain a balanced budget.
J. Changing currency values cause consumer spending on imports to increase by $300 million.
K. A recession results in job losses. As a result, government spending on unemployment benefits increases by $10 billion.