2. Measuring Input/Output

Question 1

The market value of all final goods and services produced inside our borders during the current year
- Relates to where the good was produced
- Compensation + interest + profits + rental income + proprietor’s income
- Final vs. Intermediaries

Answer 1

Gross Domestic Product (GDP)

Question 2

Two-way relationship between households, businesses, markets for G/S, and market for resources

Answer 2

Circular Flow Diagram

Question 2

Output, taking out, selling to others to make money, money going in for us

Answer 2

Export

Question 3

Input, taking in, consumption of G/S, money going out, losing economic production

Answer 3

Import

Question 4

Counts what is produced domestically while foreignly
- Relates to who produced the good

Answer 4

Gross National Product (GNP)

Question 5

Counts the dollars used to buy those goods and services
- Does not account for inflation, so it’s not good indicator
- More # of Nominal GDP, less # of Real GDP = Inflation occurred (uses both)
- Look at decrease/increase wording not the #

Answer 5

Nominal GDP

Question 6

Counts the # of goods and services produced within our economy
- Does not count quality of good
- More production means more jobs = good
- It is our output; if Real increases, output increases too
- Look at decrease/increase wording not the #

Answer 6

Real GDP

Question 7

Household only, smaller market baskets

Answer 7

Consumer Price Index (CPI)

Question 8

Countries, larger market baskets

Answer 8

GDP Deflator

Question 9

Result - starter/starter
- Last step in the problem

Answer 9

% Percent Change

Question 10

1. Determine GDP Deflator or CPI indicator
2. Set up a table-ish by years on x-axis and NGDP, Indicator | Real GDP of (year)
3. First row of NGDP stays the same under Real GDP column (check year asked)
4. Figure out the next years # in RGDP column by using NGDP of next years # multiply by both indicators, first years cancel out leaving you with the next years #
5. Use % change of RGDP #’s

Answer 10

Steps to solve the problem

Question 11

Y = C + I + G + X
- Y = Income
- C = Consumer spending
- I = Business investments
- G = Gov
- X = Exports - imports
- More imports = decrease in GDP because exports add, imports reduce

Answer 11

Expenditure Method