Chapter 2

Question 1

Gross Domestic Product

Answer 1

The measure of aggregate output in the national income accounts

Question 2

Aggregate output

Answer 2

the sum of the values of all goods produced in the economy except intermediary goods

Question 3

Intermediary goods

Answer 3

products that are used in the production process to make other goods, which are ultimately sold to consumers
(wheat, soil, crude oil, steel, sugar, etc.)

Question 4

GDP Definition 1 PRODUCTION SIDE

Answer 4

the value of the final goods and services produced in the economy during a given period

Excluding intermediary goods

Question 5

GDP Definition 2 PRODUCTION SIDE

Answer 5

the sum of value added in the economy during a given period

production - intermediate goods used in production.

Question 6

GDP Definition 3 INCOME SIDE

Answer 6

the sum of incomes in the economy during a given period.

the revenues left to a firm after it has paid for its intermediate goods

Question 7

Reasons why nominal GDP increases over time

Answer 7

the production and prices of most goods also increase over time.

Question 8

Reasons to use real GDP

Answer 8

to eliminate the effect of increasing prices on our measure of GDP
Uses a common price

Question 9

GDP growth

Answer 9

the rate of growth of real GDP

Question 10

Frequency of analysing GDP

Answer 10

normally quarterly not annually

Question 11

Employment

Answer 11

the number of people who have a job

Question 12

Unemployment

Answer 12

the number of people who do not have a job but are looking for one

Question 13

labour force

Answer 13

the sum of employment and unemployment

Question 14

Why is the unemployment rate hard to calculate

Answer 14

Because we can’t know for certain exactly how many people are looking for a job
SA uses the QLFS

Question 15

not in the labour force

Answer 15

those who do not have a job and are not looking

Question 16

discouraged workers

Answer 16

the unemployed give up looking for a job and therefore are no longer counted as unemployed

Question 17

Low unemployment rate

Answer 17

Leads to labour shortages

Question 18

Inflation

Answer 18

a sustained rise in the general level of prices

Question 19

Deflation

Answer 19

a sustained decline in the price level

Question 20

Ways to calculate the inflation rate

Answer 20

GDP deflator ( average price of output)
Consumer Price Index (average price of consumption)

Question 21

Why are the prices not the same

Answer 21

Some of the goods in GDP are sold not to consumers but to firms, government, or foreigners
Some of the goods bought by consumers are not produced domestically

Question 22

CPI

Answer 22

Measures the cost of living
Updated by Stats SA via IES (Income and Expenditure Survey) gives the cost in rand for a specific list of goods and services over time

Question 23

Factors for labour-market rigidities

Answer 23

1. A generous system of unemployment insurance
2. A high degree of employment protection
3. Minimum wages
4. Bargaining rules, such as extension agreements