L1 - Measuring the Macroeconomy + The Goods Market

Question 1

What are the three ways of measuring GDP?

Answer 1

• The Production Approach
• The Income Appraoch
• The Expenditure Approach

In theory all the three approaches should result in the same value

Question 2

Formula for GDP

Macroeconomics Accounting Identity

Answer 2

Question 3

Formula for GDP Deflator

Answer 3

Question 4

What is the GDP Deflator?

Answer 4

• The GDP price deflator measures the changes in prices for all the goods and services produced in an economy.
• Using the GDP price deflator helps economists (comparing different values from different years) compare the levels of real economic activity from one year to another.
• The GDP price deflator is a more comprehensive inflation measure than the Consumer Price Index (CPI) index because it isn’t based on a fixed basket of goods.

It is an inflation measure, like CPI!

Question 5

What doesn’t GDP measure take into account…

Answer 5

• Depreciation of physical captial and resources (vs. Net Domestic Product)
• Household tasks
• Undergroud activities
• Externalities in non-monetary welfares
• Residence-based incomes from abroad (vs. Gross National Income)
• Other dimensions of living welfare

Question 6

Analysis at different timescales (i.e. Short-Run, Medium-Run, Long-Run)

Answer 6