Podcast
Questions and Answers
How is real GDP measured?
How is real GDP measured?
Total of all final goods and services produced in the U.S. valued at a base year's prices.
GDP calculated using current year prices is often called?
GDP calculated using current year prices is often called?
Nominal GDP uses the current year's prices to measure GDP.
GDP calculated using base year prices is called?
GDP calculated using base year prices is called?
Real GDP uses base year prices to take out inflationary effects.
GDP divided by the number of people in the country is called?
GDP divided by the number of people in the country is called?
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What happened to the real GDP growth rate during the Great Recession of the late 2000s?
What happened to the real GDP growth rate during the Great Recession of the late 2000s?
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In the last few years in the U.S., have imports been greater than or less than exports?
In the last few years in the U.S., have imports been greater than or less than exports?
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A man in Washington, DC buys a Volvo directly from Sweden for $30,000. Which of the following is true?
A man in Washington, DC buys a Volvo directly from Sweden for $30,000. Which of the following is true?
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The purchase of the Volvo for $30,000 in the previous question changes GDP by how much?
The purchase of the Volvo for $30,000 in the previous question changes GDP by how much?
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Why are transfer payments not included in GDP?
Why are transfer payments not included in GDP?
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Calculate the unemployment rate if there are 160,000 people of working age, 150,000 have jobs, and 5,000 are looking for work.
Calculate the unemployment rate if there are 160,000 people of working age, 150,000 have jobs, and 5,000 are looking for work.
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If the labor force increases but the number of unemployed stays the same, what happens to the unemployment rate?
If the labor force increases but the number of unemployed stays the same, what happens to the unemployment rate?
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How does going back to school affect the labor force?
How does going back to school affect the labor force?
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Inflation means that which of the following is true?
Inflation means that which of the following is true?
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CPI uses what to calculate price levels?
CPI uses what to calculate price levels?
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Which definition is the best one for GDP?
Which definition is the best one for GDP?
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How is the unemployment rate calculated?
How is the unemployment rate calculated?
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Inflation measure is ______, while deflation measure is ______.
Inflation measure is ______, while deflation measure is ______.
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Does GDP include the purchase of a haircut?
Does GDP include the purchase of a haircut?
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Which situation represents inflation in an economy?
Which situation represents inflation in an economy?
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What was the peak yearly unemployment rate around the Great Recession?
What was the peak yearly unemployment rate around the Great Recession?
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What was the average annual increase in real GDP from the Great Recession to 2016?
What was the average annual increase in real GDP from the Great Recession to 2016?
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How much does paying a carpenter $10,000 to build a garage raise GDP?
How much does paying a carpenter $10,000 to build a garage raise GDP?
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How much does purchasing $3,000 worth of materials to build a garage raise GDP?
How much does purchasing $3,000 worth of materials to build a garage raise GDP?
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How much does cutting down a tree to build a garage raise GDP?
How much does cutting down a tree to build a garage raise GDP?
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How much do housing transactions raise GDP?
How much do housing transactions raise GDP?
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If the unemployment rate decreases, which of the following is true?
If the unemployment rate decreases, which of the following is true?
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If a country is importing $1 million worth of goods and exporting $800,000, then net exports are?
If a country is importing $1 million worth of goods and exporting $800,000, then net exports are?
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If the unemployment rate in the United States is 4%, what is likely happening to real GDP?
If the unemployment rate in the United States is 4%, what is likely happening to real GDP?
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At which levels of inflation should the country be concerned?
At which levels of inflation should the country be concerned?
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Which measure is the best indicator of the average individual's well-being?
Which measure is the best indicator of the average individual's well-being?
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What does China's real GDP measure not consider when determining citizens' well-being?
What does China's real GDP measure not consider when determining citizens' well-being?
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Why is the purchase of a share of stock not included in GDP?
Why is the purchase of a share of stock not included in GDP?
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What component of GDP is the government attempting to increase by sending tax refunds?
What component of GDP is the government attempting to increase by sending tax refunds?
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What component of GDP would increasing spending on highways and roads affect?
What component of GDP would increasing spending on highways and roads affect?
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What does the BLS report signal about the economy if 200,000 jobs are added and the unemployment rate drops to 4.7%?
What does the BLS report signal about the economy if 200,000 jobs are added and the unemployment rate drops to 4.7%?
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Were inflation levels leading up to the Great Recession below or above the typically targeted rate of around 2%?
Were inflation levels leading up to the Great Recession below or above the typically targeted rate of around 2%?
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Which answer best describes the annual growth rates during the Great Recession?
Which answer best describes the annual growth rates during the Great Recession?
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What year did unemployment rates drop below 2008 levels after the Great Recession?
What year did unemployment rates drop below 2008 levels after the Great Recession?
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Study Notes
GDP Measurement
- Real GDP measures total final goods and services produced in the U.S. at base year prices.
- Nominal GDP is calculated using current year prices, reflecting inflation effects.
- Real GDP removes inflationary impacts by using base year prices, providing a clearer economic performance picture.
GDP Per Capita
- GDP per capita is the total GDP divided by the country's population, indicating average economic output per person.
Economic Events
- During the Great Recession (late 2000s), the real GDP growth rate experienced negative growth.
- U.S. net exports were negative, with exports at 13% and imports at 15.7%.
Import Impact on GDP
- A purchase of an imported good (e.g., a Volvo) increases consumption but also increases imports, leaving GDP unchanged due to offsetting effects.
Transfer Payments and GDP
- Transfer payments, like Social Security, are excluded from GDP calculations as they do not correspond to new goods or services.
Labor Force and Unemployment
- The unemployment rate equals the number of unemployed people divided by the labor force, including those employed or actively seeking jobs.
- If unemployment persists while the labor force grows, it implies more people are finding jobs, effectively lowering the unemployment rate.
- Discouraged workers returning to school decrease the labor force count.
Inflation and Price Levels
- Inflation represents a rise in average price levels, while deflation refers to a decrease.
- The Consumer Price Index (CPI) uses a standard basket of goods to gauge price changes; core CPI excludes food and energy.
GDP Contributions and Transactions
- GDP increases through consumption when services are purchased, such as paying a carpenter, but not through unpaid DIY activities.
- Only new constructions count towards GDP; resale of existing assets does not contribute to economic measures.
Economic Indicators and Rates
- The average annual increase in real GDP post-Great Recession was between 1.6% and 2.6%.
- The peak unemployment rate during the Great Recession reached 9.6%.
- Full employment is considered around 4% unemployment, with real GDP expected to grow at standard rates under these conditions.
Concerns and Measurements
- Inflation rates above 2%, such as 5%, signal concerning price increases impacting wealth, prompting government intervention.
- Real GDP per capita is a more accurate reflection of individual well-being as it accounts for inflation and population.
Stock Market Transactions
- Stock purchases do not enter GDP calculations as they do not reflect the production of goods or services.
Government Actions
- Tax refunds aim to boost consumption, while infrastructure spending affects government expenditure components of GDP.
Economic Recovery Signals
- Job additions and declining unemployment rates are positive indicators of economic health.
- Inflation rates exceeded the target during the Great Recession, with 2.9% in 2007 and 3.8% in 2008, then plummeting in 2009.
Post-Recession Unemployment Trends
- Unemployment rates only dropped below 2008 levels in 2015 after years of high persistence post-Recession.
Studying That Suits You
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Description
Test your knowledge with these flashcards on Chapter 3 of Economics, focusing on the concepts of real GDP and nominal GDP. Learn how GDP is measured and the significance of base year pricing in economic analysis.
