ECON1132 Chapter Notes - Chapter 5: Net Domestic Product, Weighted Arithmetic Mean, Disposable And Discretionary Income

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indigoduck689

28 Jan 2014

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Gdp a measure of the total value of goods and services produced in a country during a year. It allows policymakers to see whether the economy is contracting or expanding. It is equal to the total production of consumption and investment goods, government purchases, and net exports. Gdp = c + i + g + x. Gdp can either be measured as a flow or products or as a sum of earnings. Flow of product approach only final goods are calculated in this, meaning the goods bought and used. This approach calculates the total money value of the flow of final products produced in the nation. Earnings or income approach statisticians can measure the flow of business costs such as the earnings that households receive from firms, wages paid to labor, rents paid to land, and profits paid to capital. Gdp = wages + interest + rents + profits.

Related Questions

Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.

Topic 1: GDP and Its Limitations

The national income accounts measure productivity, spending, and income; but these accounts were not designed to measure economic welfare. GDP only measures the value of marketed goods and services for a country during a given period of time. Goods and services that are not sold in markets, such as food produced and consumed at home and household articles, are not included in GDP. Discuss aspects of economic welfare ignored in GDP measurement.

Discussion Checklist:

A.) What are the limitations of the GDP in measuring total output and national welfare?

B.) What products (goods and services) are excluded from the GDP computation?

C.) What are the impacts of the shortcomings of the GDP as a measure of the national product and national welfare?

ochrewolf599

In a given year, we find the value of final goods and services produced in the economy is $15t. Your professor told you that this is the expenditure approach to measuring GDP. He also told you we can measure GDP using the value of all the incomes generated from that production, but when you do, the dollar value of incomes is less than $15t. Please explain why this is so AND how this problem is corrected.

yellowwoodchuck103

ECON1132 Chapter Notes - Chapter 5: Net Domestic Product, Weighted Arithmetic Mean, Disposable And Discretionary Income

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