Lecture 2 - Measuring Macro Data Flashcards

1
Q

What are the 3 approaches to viewing/measuring GDP?

A
  • production approach
  • expenditure approach
  • income approach
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2
Q

What is meant by national accounting?

A

a process that looks at the state of an economy at a given time

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3
Q

Give the production definition of GDP

A

the total market value of domestically-produced final goods and services over a given period

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4
Q

Give the expenditure definition of GDP

A

the total expenditure on domestically-produced final goods and services over a given period

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5
Q

Give the income definition of GDP

A

the total income earned by domestically-located factors of production over a given period

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6
Q

What is a firm’s value added?

A

the value of its output minus the value of the intermediate goods the firm used to produce that output

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7
Q

Why do we not include intermediate goods when calculating GDP?

A

as the value of the final goods already includes the value of the intermediate goods

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8
Q

What formula is used for calculating GDP?

A

Y = C + I + G + NX

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9
Q

What is meant by consumption?

A

the value of all goods and services bought by households

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10
Q

What is the difference between durable goods and non-durable goods?

A
  • durable goods last a long time (e.g. cars, home appliances)
  • non-durable goods last a short time (e.g. food, clothing)
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11
Q

What are the 2 definitions for investment?

A
  • spending on (the factor of production) capital
  • spending on goods bought for future use
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12
Q

What are the 3 different types of investment?

A
  • business fixed investment
  • residential fixed investment
  • inventory investment
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13
Q

What is meant by ‘business fixed investment’?

A

spending on plant and equipment that firms will use to produce other goods and services

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14
Q

What is meant by ‘residential fixed investment’?

A

spending on housing units by consumers and landlords

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15
Q

What is meant by ‘inventory investment’?

A

the change in the value of all the firms’ inventories

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16
Q

What is the equation for ‘gross fixed investment’ or ‘gross fixed capital formation’?

A

gross fixed investment = business + residential fixed investment

17
Q

What is the equation for ‘Gross Capital Formation’?

A
  • gross capital formation = GFCF + inventory changes
  • (= Investment)
18
Q

What does Government Spending include?

A

includes all government spending on goods and services

19
Q

Why doesn’t government spending include transfer payments (e.g. unemployment insurance payments)?

A
  • because transfer payments do not represent spending on goods and services
  • it is instead a ‘transfer’ from one place to another
20
Q

What is the definition and equation for NX (net exports)?

A
  • net exports is the value of total exports minus the value of total imports
  • NX = EX - IM
21
Q

What is a stock, and what is a flow?

A
  • a stock is a quantity measured at a point in time
  • a flow is a quantity measured per unit time
22
Q

In the US and the UK, what is the ratio of labour income to total income? (share of GDP to labour)

A

approximately 2/3

23
Q

List 3 important components that GDP does not include

A
  • home production (where parents raise and care for their children)
  • goods or services not transacted in markets
  • used good transactions
  • housing services
  • underground economy
24
Q

List 3 issues for measuring GDP moving forward?

A
  • gig economy
  • digital economy
  • intangible assets
25
What is the equation linking nominal GDP, real GDP, and the price level?
nominal GDP = price level x real GDP
26
What is the equation for the GDP deflator?
GDP deflator = Nominal GDP / Real GDP
27
What does a GDP deflator show?
- it shows how much a change in GDP relies on changes in the price level - can be viewed as a measure of general inflation in the domestic economy
28
Define inflation rate
the rate at which prices change over time
29
Give 4 different measures of inflation
- GDP deflator - Consumer Price Index (CPI) - Harmonised Index of Consumer Prices (HICP) - Retail Price Index (RPI)
30
How is CPI measured?
measures the prices of a typical basket of goods
31
What is the Harmonised Index of Consumer Prices (HICP)?
a measure of the overall level of prices for countries in the EU
32
How is RPI measured?
a CPI type of inflation measure which includes housing costs (e.g. mortgage prices, etc) among other things
33
What are the 3 main differences between CPI and the GDP deflator?
- prices of capital goods - prices of imported consumer goods - the basket of goods
34
How does CPI and the GDP deflator differ in relation to the prices of capital goods?
prices of capital goods are included in the GDP deflator (if produced domestically), but it is excluded from CPI
35
How does CPI and the GDP deflator differ in relation to the price of imported consumer goods?
included in CPI, excluded from the GDP deflator
36
How does CPI and the GDP deflator differ in relation to the basket of goods?
- CPI: fixed - GDP deflator: changes every year
37
What are the 2 steps to make comparisons of GDP across countries?
- GDP must be expressed in a common currency by first adjusting it to the exchange rate - this value of nominal GDP must be multiplied by the ratio of prices in the countries - (the final number adjusts for differences in prices across countries)