Principle of Economics5

Your task is to complete all assigned questions to the best of your ability. Best of luck!

1. What does Gross Domestic Product (GDP) measure?

2. What is the equation used to calculate Gross Domestic Product (GDP)?

3. In two or more sentences describe the difference between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product?

4. Identify at least three (3) factors that are omitted from our country Gross Domestic Product (GDP)?

5. In one to two sentences, please define, the Human Development Index (HDI)?

6. In one to two sentences, describe why Gross Domestic Product (GDP) is used as a key economic indicator?

7. In two or more sentences describe what assumptions can be made about country’s that have a high Gross Domestic Product (GDP)?

8. How is Gross Domestic Product (GDP) per capita calculated?

9. If Real Gross Domestic Product (GDP) fall for two or more consecutive quarters, which phase of the business cycle would best describe our economy?

10. In one to two sentences describe whether Real Gross Domestic Product (GDP) or Gross Domestic Product (GDP) is a better measure of our country’s well-being?

Grading Rubric:

Able to state and articulate what Gross Domestic Product both Real and Nominal. Can adequately state Human Also able to give examples and articulate Gross Domestic Product both Real and Nominal, and adequately state Human Development Index.

NOTES/COURSE

gross Domestic Product (GDP) is defined and the sale of final goods produced within a country’s borders over a specified time-frame.

GDP = C + I + G + NX

Where, C = Consumption; I = Investment; G = Government Spending, and; NX = Net Exports (Exports – Imports).

Real GDP accounts for inflation and fluctuations within our economy.

Nominal GDP is the dollar amount assignment to the sale of final goods and services within our country’s borders, or it can be written as:

Σ = P (Price) * Q (Quantity)

GDP is used as a key economic indicator as it provides a bird’s eye view of our economy and GDP is used to measure one country against others. GDP provides an economic synopsis of a country.

GDP follows our country’s business cycle; for example, during an expansionary phase of the business cycle in which interest rates and inflation are at higher levels it would be undesirable to purchase large ticket items. Whereas, during a recessionary phase of the business cycle in which interest rates and inflation are lower levels would be the best time to purchase large ticket items.

GDP does not account for the following items:

· Leisure time

· Happiness

· Goods sold second hand

· Domestic production

· Goods and services sold on the black market

Human Development Index (HDI) is used to measure the social aspects of domestic consumers. The HDI measure social factors such as life expectancies, per capita income, and levels of education. One can view GDP as the economic indicator looking at our economy and, the HDI at a lower level by looking at the social well-being of domestic consumers.