GDP Calculation: Expenditure Approach

What is the purpose of selecting a reference base year in GDP calculation?

To compare the prices of goods and services across different years (correct)

To compare the GDP of different countries

To express the value of final goods and services in terms of the prices of that same year

To identify the changes in GDP due to inflation

What is the difference between real GDP and nominal GDP?

Real GDP is the value of goods and services produced in a given year, while nominal GDP is the total value of goods and services produced in the economy

Real GDP is calculated using the expenditure approach, while nominal GDP is calculated using the income approach

Real GDP is the total value of goods and services produced in the economy, while nominal GDP is the value of goods and services produced in a given year

Real GDP is the value of goods and services produced in a given year, expressed in terms of the prices of that same year, while nominal GDP is the value of goods and services produced in a given year, expressed in terms of the prices of the base year (correct)

Why are real GDP and nominal GDP the same in the base year?

Because the quantities of goods and services produced do not change over time

Because the base year and the current year are the same thing (correct)

Because the prices of goods and services do not change over time

Because the government spends more on defence in the base year

What is the formula used to calculate GDP using the expenditure approach?

Y = C + I + G + NX Signup and view all the answers

What is the reason for calculating real GDP?

To identify the changes in GDP over time that are due to greater production Signup and view all the answers

What is the purpose of multiplying the quantities of goods and services by the prices of the base year?

To calculate real GDP Signup and view all the answers

What is the formula to calculate GDP using the Expenditure Approach?

Y = C + I + G + NX Signup and view all the answers

What does a negative Net exports (NX) value indicate?

A trade deficit Signup and view all the answers

What is the key difference between the Income Approach and the Expenditure Approach?

The Income Approach calculates GDP at factor prices, while the Expenditure Approach calculates GDP at market prices. Signup and view all the answers

What is the percentage of GDP accounted for by Consumption expenditure?

71.1% Signup and view all the answers

What is the name of the approach that calculates GDP by adding up the incomes earned by households for their services?

Income Approach Signup and view all the answers

What is the term for GDP calculated using the Expenditure Approach?

Gross Domestic Product (GDP) Signup and view all the answers

According to the income approach and expenditure approach, what should be ideally equal?

Total income and total expenditure Signup and view all the answers

What does a large statistical discrepancy between the income approach and expenditure approach indicate?

Low accuracy of GDP estimates Signup and view all the answers

What is the main difference between GDP and GNP?

GDP is the market value of final goods and services produced within a country, while GNP is the market value of final goods and services produced by residents of a country Signup and view all the answers

Why do incomes tend to be reported accurately, while expenditures are estimated?

Incomes are reported to SARS or similar organizations, while expenditures are not Signup and view all the answers

What is the purpose of looking at the statistical discrepancy?

To compare the accuracy of the income approach and expenditure approach Signup and view all the answers

What is the sum of incomes typically compared to in the expenditure approach?

Sum of expenditures Signup and view all the answers