Week 1 - GDP

Question 1

GDP as a measure of the economy fails in one regard because different people make different decisions, spend different amounts of time pursuing leisure, and earn different wages. This is described by what limitation?

Answer 1

GDP ignores distribution

Question 2

Dividing _____ by the annual growth rate gives the approximate number of _____ until the original amount doubles.

Answer 2

70;years

Question 3

In the circular flow diagram, households provide _____ to the market for inputs and _____ from the market for inputs.

Answer 3

labour and inputs; receive income

Question 4

Waubub is buying a new car. In this case, the tires on the car are _____ counted in GDP because they are _____.

Answer 4

not individually; not a final good

Question 5

Would an employee directly spending her paycheck on an oil change for her car be in the market for inputs or outputs, and why?

Answer 5

market for outputs, because once the paycheck is received it belongs to the household sector and is then used in the output market

Question 6

Is government spending on the military included in GDP?

Answer 6

Yes! It is a final SERVICE

Question 7

Are the four tires on a new car included individually in the GDP?

Answer 7

No. They are included in the price of the car

Question 8

Is a fifth tire bought seperately to replace one of the tires on a new car included individually in the GDP?

Answer 8

Yes! An additional tire is it’s own final good

Question 9

What’s in the market for inputs

Answer 9

inputs provided, inputs bought

Question 10

What’s in the market for outputs

Answer 10

Output bought, output sold

Question 11

What do households do in BOTH markets for inputs and markets for outputs?

Answer 11

Provide inputs and buy outputs

Question 12

What do businesses do in BOTH markets for inputs and markets for outputs?

Answer 12

Buy inputs and provide outputs

Question 13

What is GDP when inputs are provided by ____ ?

Answer 13

provided by: households
GDP = income received

Question 14

What is GDP when inputs are bought by ____ ?

Answer 14

bought by: businesses
GDP = Wages & profits

Question 15

What is GDP when outputs are bought by ____ ?

Answer 15

bought by: households
GDP = spending on output

Question 16

What is GDP when outputs are sold by ____ ?

Answer 16

sold by: businesses
GDP = market value

Question 17

Is this a micro or macroeconomic question: What determines the salary offered by UBC to staff in the Totem Dining Room?

Answer 17

microeconomic (think individual firm)

Question 18

Paradox of thrift

Answer 18

Families worried about a recession that cut spending will actually cause a recession g.

Question 19

Disposable income

Answer 19

the amount of income a household has after receiving transfers and paying taxes.

Question 20

Net exports (NX)

Answer 20

Exports - imports (X - IM)

Question 21

Gross domestic product (GDP)

Answer 21

the market value of all final goods and services produced within a country in a year.

Question 22

What does GDP not include

ISONF

Answer 22

• value of intermediate goods
• value of stored inventories
• value of things from other years
• goods that are not final
• anything produced foreignly

ISONF

Question 23

Three ways to measure GDP

Answer 23

1. Total spending
2. Value added (output)
3. Total income

Question 24

Total spending (GDP method)

cig

Answer 24

y = C + I + G + NX

Question 25

Value Added (GDP method)

Answer 25

Total sales - intermediate cost (for each stage)

Question 26

Total income (GDP method)

Answer 26

total wages + profits

Question 27

What does GDP miss?

SEIP

Answer 27

• Shadow economy
• Environmental damage
• Ignores distribution
• Prices are not necessarily values

SEIP

Question 28

Factors of income

Answer 28

Wages (Labour)
Interest (Capital)
Rent (Land)
Profit (Entrepreneurship)

Question 29

Real GDP

Answer 29

GDP measured with constant prices - useful for comparisons over time

Question 30

Nominal GDP

Answer 30

GDP measured in today’s prices

Question 31

Chained dollars

Answer 31

Method of calculating GDP using average price. IN THE BASE YEAR DON’T USE THIS AVERAGE

Question 32

GNP gross national product

Answer 32

Gross national product - income earned by residents regardless of where that income is earned (has to be a resident tho)

Question 33

What’s better in the short run (GDP or GNP)

Answer 33

GDP

Question 34

Macroeconomics

Answer 34

examines the aggregate behaviour of the economy; society as a whole

Question 35

National accounts - four main economic sectors

Answer 35

households, firms, governments, foreign households

Question 36

Physical capital

Answer 36

purchase of new machinery and buildings - a type of investment

Question 37

Investment

Answer 37

The spending of firms of productive physical capital and on changes to inventories

Question 38

What national account does investment

Answer 38

Firms

Question 39

What national account has rent, entrepreneurship profit, wages, interest

Answer 39

households

Question 40

private savings

Answer 40

disposable income not spent on consumption

Question 41

Monetary policy

Answer 41

changes quantity of money

Question 42

Fiscal policy

Answer 42

Changes to government spending

Question 43

Trade policy

Answer 43

controls the flow of goods

Question 44

Labour policy

Answer 44

influences the labour markets

Question 45

Keynes

Answer 45

Said we should spend in a recession - this is good

Question 46

how to calculate change in GDP

Answer 46

(final - initial)/initial x 100%

Question 47

Test

Answer 47

Test