GDP: Measurement and Importance

What is GDP?

• The total market value of all final goods and services produced in an economy in a given year

• The total market value of all intermediate goods and services produced in an economy in a given year

• The total market value of all goods and services consumed in an economy in a given year

• The total market value of all goods and services imported and exported in an economy in a given year

What is the largest portion of GDP?

• Consumer spending

• Business investment

• Government spending

• Foreign trade

What does real GDP control for?

• Inflation

• Unemployment

• Interest rates

• Exchange rates

How is economic growth measured?

• By comparing real GDP over time

• By comparing nominal GDP over time

• By comparing consumer spending over time

• By comparing government spending over time

What is the projected real GDP growth in the longer run?

• 2.3 to 2.5 percent

• 3.3 percent

• 4.0 percent

• 5.5 percent

What is the main purpose of GDP?

• To measure well-being

• To measure economic growth

• To measure income distribution

• To measure social welfare

What is one limitation of GDP as a welfare indicator?

• It does not incorporate any measures of welfare

• It only includes market transactions

• It does not describe income distribution

• It ignores externalities

What does GDP not include in its calculations?

• Domestic or voluntary work

• Black market transactions

• Products that negatively affect social welfare

• All of the above

Why is income distribution important to consider for social welfare?

• It determines the overall economic output

• It affects the affordability of goods and services

• It improves the standard of living

• It decreases negative externalities

What are some negative externalities that can arise from economic growth?

• Increased exploitation of resources

• Pollution

• Overfishing

• All of the above