Q&A AP Econ Ch7 GDP Questions
Terms
undefined, object
copy deck
- What is gross domestic product?
- the most widely reported measure of a nation’s economic performance
- What does GDP measure?
- The market value of all final goods and services produced in a nation during a period of time, usually a year
- What is gross national product (GNP)?
- GNP measures the market value of all final goods and services produced by a nation’s residents, no matter where they are located
- What is an advantage of using GDP?
- GDP measures value using dollars, rather than a list of the number of goods and services
- Does GDP measure secondhand transactions?
- No, Current GDP does not include the sale of a used car or the sale of a home constructed some years ago
- What are intermediate goods?
- Goods and services used as inputs for production of final goods
- Does GDP count intermediate goods?
- No, to avoid double counting, GDP only measures final goods and services
- Does GDP measure nonproductive financial transactions?
- No, GDP does not count purely private or public financial transactions such as giving gifts, stocks, bonds, or transfer payments
- What is a transfer payment?
- A government payment to individuals, not in exchange for goods or services currently produced
- What leakages are present in the circular flow of economic activity?
-
Household saving
Household taxes paid
Income spent on imports - What injections are present in the circular flow of economic activity?
-
Business spending
Government spending
Foreign spending - What are the two approaches we use to measure GDP?
-
Expenditure
Income - What is the expenditure approach for measuring GDP?
- The national income accounting method that measures GDP by adding all the spending for final goods and services
- What is the income approach for measuring GDP?
- What is the expenditure approach for measuring GDP?
- What are the four sectors of GDP?
-
GDP = C + I + G + (X - M)
Consumption
Investment
Government
Foreign (X - M) - What are the Income components of GDP?
- GDP = Compensation of employees + rents + profits + net interest + nonincome adjustments
- What is depreciation?
- An allowance for the capital worn out producing GDP
- What are indirect business taxes?
- Taxes levied as a percentage of the prices of goods sold and therefore become a part of the revenue received by firms
- What are the 5 shortcomings of GDP?
-
Nonmarket transactions
Distribution, kind, & quality of products
Neglect of leisure time
Underground economy
Economic bads - How do you arrive at NDP (Net Domestic Product)?
- GDP minus depreciation of the capital worn out in producing output
- What is "real" GDP?
- The value of all final goods produced during a given time period based on the prices existing in a selected base year
- What is a chain price index? What are the 2 most commonly used price indices?
-
A measure that compares changes in the prices of all final goods during a given period to the prices of those goods in a base year.
CPI (Consumer Price Index)
Personal Consumption Implicit Price Deflator