Economic Environment

Question 1

Definition of GDP

Answer 1

GDP is the market value of all final goods and services produced within a country in a given period of time.

Question 2

What are the components of GDP?

Answer 2

GDP=Consumption + Investment + Government Purchases + Net Exports

Question 3

Definition of real GDP

Answer 3

– Real GDP = the production of goods and services valued at constant prices (that is, holding prices constant at some base year)

Question 4

Definition of GNI ( Gross National Income)

Answer 4

Gross national income (GNI), the sum of a country’s gross domestic product (GDP) plus net income (positive or negative) from abroad. It represents the value produced by a country’s economy in a given year, regardless of whether the source of the value created is domestic production or receipts from overseas.

Question 5

Similarities and differences between GDP and GNI

Answer 5

Similarity:

• all goods and services produced by national firms

Difference:

• GNI defined by residents
• GDP defined by location

Question 6

Purchasing Power Parity (PPP)

Answer 6

How many units of a local currency you would need to buy a basket of goods and services in the local market that one US$ can buy in the US è Ability to purchase products or spending power

Question 7

– Economic growth rate; business cycle; inflation (CPI); unemployment; productivity; gross domestic investment; business/consumer confidence

Question 8

The likelihood that economic mismanagement will cause drastic changes in a country’s business environment that adversely affect the operations of a firm in the country.