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    WHAT'S IN Gross Domestic Product (GDP) ?

    Uploaded by

    Tyler Carroll
    This document discusses the components of Gross Domestic Product (GDP) including consumption, investment, government spending, and net exports. It provides examples of how specific purchases would be categorized within each component. It also discusses the difference between nominal and real GDP, and why real GDP is a better measure by accounting for inflation. Finally, it poses questions about calculating GDP for hypothetical economies and determining economic growth based on changes in nominal GDP over time.

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    WHAT'S IN Gross Domestic Product (GDP) ?

    Uploaded by

    Tyler Carroll
    109 views2 pages
    This document discusses the components of Gross Domestic Product (GDP) including consumption, investment, government spending, and net exports. It provides examples of how specific purchases would be categorized within each component. It also discusses the difference between nominal and real GDP, and why real GDP is a better measure by accounting for inflation. Finally, it poses questions about calculating GDP for hypothetical economies and determining economic growth based on changes in nominal GDP over time.

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    What's in GDP

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    This document discusses the components of Gross Domestic Product (GDP) including consumption, investment, government spending, and net exports. It provides examples of how specific purchases would be categorized within each component. It also discusses the difference between nominal and real GDP, and why real GDP is a better measure by accounting for inflation. Finally, it poses questions about calculating GDP for hypothetical economies and determining economic growth based on changes in nominal GDP over time.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    109 views2 pages

    WHAT'S IN Gross Domestic Product (GDP) ?

    Uploaded by

    Tyler Carroll
    This document discusses the components of Gross Domestic Product (GDP) including consumption, investment, government spending, and net exports. It provides examples of how specific purchases would be categorized within each component. It also discusses the difference between nominal and real GDP, and why real GDP is a better measure by accounting for inflation. Finally, it poses questions about calculating GDP for hypothetical economies and determining economic growth based on changes in nominal GDP over time.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    WHAT’S IN Gross Domestic Product (GDP)?

    A. Components of GDP
    Fill in the blank with the component of GDP each of these items would fit into.
    1. _________________________ a mechanic fixes a transmission.
    2. _________________________ a business purchases computer software and a PC.
    3. _________________________ a local library purchases new audio books.
    4. __________________________ a retailer purchases tennis shoes from a Chinese
    manufacturer, then sells them.
    5. _________________________ a mother purchases the same shoes from the retailer.

    Write one more example for each of the four components.


    6. Consumption: ______________________________________________________________________
    7. Investment: _________________________________________________________________________
    8. Government Spending: _____________________________________________________________
    9. Net Exports: _________________________________________________________________________

    10. Explain why the sale of used goods is not included in GDP:

    B. Nominal and Real GDP


    You are an economist who has been asked to calculate your nation’s GDP.
    1. Write the GDP Formula (Output Expenditures Model)

    ___________+___________+ ___________+ (___________ -___________ ) = GDP

    2. Label the items below with the correct GDP label: Consumption/Consumer Spending (C),
    Investment (I), Government Spending (G), Exports (X), or Imports (M).

    Market Value

    a. ______ Paving Roads 3 million dollars


    b. ______ Groceries 28 million dollars
    c. ______ Coca-Cola Exports Drinks to China 7 million dollars
    d. ______ Import Oil from Saudi Arabia 5 million dollars
    e. ______ Ford builds a new plant in Atlanta 1 million dollars
    f. ______ Clothing 11 million dollars

    3. What is the total nominal GDP Value of the Items listed above? __________________________

    4. Why is it important to adjust nominal GDP to real GDP to account for inflation?
    C. Assessment
    1. Assume that a country has a closed economy with only three goods/services (no net
    exports). In a given year, the economy produces:

    a) Three haircuts at $10 each


    b) Two factory machines at $100 each
    c) One highway repair that costs $500

    2. What is total GDP for this economy? ________


    3. What percent of GDP is consumption? ________
    4. What percent of GDP is investment? ________
    5. What percent of GDP is government spending? ________

    6. Suppose an economy’s nominal GDP increased 3 percent in 2008. Why is this information
    alone not enough to determine whether the economy experienced economic growth?
    What other information would you need to determine that?

    7. Why is GDP not a true measure of the standard of living? What other factors should be
    considered when determining a country’s standard of living?

    8. Using the data, calculate the GDP for Country A:

    Year 1: 2020
    Consumer Spending $ 55 million

    Investment Spending $ 79 million

    Government Spending $46 million

    Net Exports Imports: $ 57 million (Negative)


    Exports: $22 million

    Year 2: 2021
    Consumer Spending $ 65 million

    Investment Spending $ 69 million

    Government Spending $56 million

    Net Exports Imports: $ 27 million (Negative)


    Exports: $42 million

    a. What can you determine about Country A’s economic growth from its current and
    future nominal GDP?

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