MACRO - Macroeconomic Measures: GDP and Economic Growth

An economic indicator is:

• a statistic that helps us understand how the economy is doing.

Which of the following is not counted as part of GDP?

• The purchase of your next door neighbor’s 20 year old house.

• The inventory would be included.

A macroeconomic externality occurs when

outcomes at the macroeconomic level are different from the outcomes at the microeconomic level.

Which of the following would be included in the computation of GDP in a particular year?

Government expenditure on national defense. Food stamps are not produced - they are part of transfer payments

Calculate the NNP using the figures in the table. What is the NNP?

$828 billion. NNP = GDP - Depreciation -income payment to rest of the world + income payment from the rest of the world

Zander read a report about the nation’s GDP from last year. The report talks about the investment expenditures. What is included in the GDP calculation of investment?

additions to inventories. Only purchases of capital goods by private businesses are in investment.

The fictional small country of Dansbert has had a robust GDP the last few years. Dansbert produces just two products: TVs and Computers. The following chart shows product quantities and prices from 2016 to 2018. With 2016 as the base year calculate the real GDP for the following years. What is the real yearly growth in 2017 & 2018?

80% for 2017 : 89% for 2018: Real yearly growth 2017 = (Real GDP2017 - Real GDP2016)/RealGDP 2016 and Real yearly growth 2018 = (Real GDP2018 - Real GDP2017)/RealGDP 2017

If Nominal GDP is $12,000 billion and the GDP deflator is 80, then Real GDP is:

$15,000 billion. Real GDP = (Nominal GDP / Deflator)x100

Janice has calculated the GDP for 2018 by using the total final goods and services times the 2018 prices of total goods and services. If Janice wishes to create a real value GDP value for 2018, what must she do?

Janice must adjust the total value 2018 GDP for inflation since the base year.

Which of the following best defines real GDP?

Real GDP is defined as the total dollar value of final goods and services produced within a country in one year after adjustment for inflation.

Which of the following is most likely to contribute to economic growth as measured by GDP per capita?

• increased stock of physical capital

Compound growth in an economy can increase people’s standard of living for country Z. If the economy for country Z starts with a GDP of 150 and a growth rate of 2% per year, what will its GDP be after 15 years?

• 202

If a country’s Gross Domestic Product increased slower than its population increase, the country’s GDP per capita would

fall

Which of the following is an important source of labor productivity?

Human capital

Generally, the average wage is

positively correlated to labor productivity.

Concerning the four phases in the economic cycle, what does point B represent?

peak

Which of the following would NOT directly result in capital deepening?

Increase in amount of labor available to businesses start ups.

You are explaining the growth accounting studies to your best friend. You tell them that the best way to achieve greater technological progress for a country is for it to

invest in education and research.

Gustavo lives in New York City and gets to work on a 10 minute subway ride. He lives in NYC because of the variety of events, restaurants, museums, education and people to experience on a daily basis. Is Gustavo’s NYC standard of living reflected in factoring the Gross Domestic Product and why or why not?

Gustavo’s environmental quality is left out of GDP because GDP focuses on productivity rather than Gustavo’s well being or standard of living.

Throughout human history, economic growth

has brought about substantial gains in incomes and standards of living in many countries.

Especially in recent history, growth has brought substantial gains in income in many countries.

Contractual laws, by establishing recourse (protection) for parties involved,

promote economic transactions and growth.

Contractual laws are not the most important factors in promoting growth.

Wesley lives in a country with little protection under the law for conducting business or bringing his ideas about a revolutionary new car tire to the market with patent production. Because of the economic conditions what will Wesley most likely do?

Find a country where he can develop his tire idea and have it protected under strong patent laws. Strong patent protection promote inventions and progress.