GDP

Question 1

What is real GDP?

Answer 1

the value of GDP adjusted for inflation

Question 2

What is nominal GDP?

Answer 2

the value of GDP without being adjusted for inflation

Question 3

Whats the formula for Real GDP?

Answer 3

(nominal GDP/GDP deflator) x 100

Question 4

Whats the formula for GDP deflator?

Answer 4

(nominal GDP/real GDP) x 100

Question 5

Formula for output growth?

Answer 5

(real GDP in Year 2 - Real GDP in year 1)/real GDP in year 1 x100

Question 6

What is GDP?

Answer 6

total value of goods and services produced in a economy

Question 7

How do you calculate GDP through expenditure approach?

Answer 7

consumer spending (C), government spending (G), business investments (I), and net exports (X-M)

Question 8

What is national expenditure equal to?

Answer 8

national expenditure = national income

Question 9

How to measure economic growth?

Answer 9

Increase of Real GDP

Question 10

What is per capita?

Answer 10

Divide by population

Question 11

What are PPP adjustments?

Answer 11

Purchasing Power Parities
a money conversion rate used to express the purchasing powers of different currencies

Question 12

What is GNI

Answer 12

GDP+net income earned abroad

Question 13

Limitations of real GDP?

Answer 13

The failure to indicate whether the nation’s rate of growth is sustainable or not
Doesnt take environemental factors into account
Doesnt measure economic inequality
Doesnt measure non financial activities

Question 14

What is the economic cycle?

Answer 14

The actual growth in the quantity of goods and services is measure by percentage change in GDP.

Question 15

What are the 4 stages in the economic cycle?

Answer 15

Boom
Recession
Slump/Depression
recovery

Question 16

Whats on the Economic cycle diagram?

Answer 16

X axis=Time
Y axis=percentage change of GDP
Straight line positive gradient called trend growth
Then a line going up then going down the going back up
The squiggly line is called the actual growth rate

Question 17

What type of pressure is there when theres a negative output gap?

Answer 17

Recesionary pressure

Question 18

What type of pressure is there when theres a positive output gap?

Answer 18

Inflationary pressure

Question 19

Characteristics of the boom stage?

Answer 19

Economy is working beyond full employment
Tax revenue is high
Consumption and investment expenditure is high
Inflationary pressure
Low unemployment rates
National income is high

Question 20

Characteristics of the slump stage?

Answer 20

low consumer spending + business investment
rapidly rising unemployment
prices may start to fall

Question 21

Characteristics of recession stage?

Answer 21

decline in economic activity
rising unemployment rates
weak output

Question 22

Characteristics of recovery stage?

Answer 22

Increased GDP
Declining unemployment rates
restored consumer and investor confidence

Question 23

Difficulties of measuring output gaps?

Answer 23

Changes in exchange rate
data is not always reliable
extrapulating data from past trend might lead to uncertainties

Question 24

Whats a recession?

Answer 24

fall in GDP in 2 successive quarters