Chapter11: Gross Domestic Product
Section: Chapter Questions
Problem 9SQP
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The three different approaches to measuring the
There are six categories of economic exchanges that are omitted from GDP calculations. One such category is government transfer payments (like unemployment insurance payment), because it represents transfers of income without new production. Another category is , because because they are unpaid and not part of market transactions. A third category is , because the transactions are unreported. Another category is because they are a transfer of ownership and do not represent current production. Another category is because only final goods are counted in the GDP. Another category is because it is difficult to estimate their market value.
Instead of looking at just the nominal GDP value of a country, economists prefer to look at the GDP value over the years to get an idea of the growth in economic output. Real GDP is calculated by summing up the value of the year’s output using year prices. While nominal GDP can rise as a result of a rise in or , we know for sure that blank has risen when real GDP rises. The up and down movements of the real GDP that occur over time are known as the . A GDP measure used to compare the economic well-being of the people in various countries is the per capita GDP, but this is not a reliable indicator of a country’s economic welfare. One reason is that it is possible for a country with a relatively high GDP to have a relatively low per-capita GDP if it has a large .
Instead of looking at just the nominal GDP value of a country, economists prefer to look at the GDP value over the years to get an idea of the growth in economic output. Real GDP is calculated by summing up the value of the year’s output using year prices. While nominal GDP can rise as a result of a rise in or , we know for sure that blank has risen when real GDP rises. The up and down movements of the real GDP that occur over time are known as the . A GDP measure used to compare the economic well-being of the people in various countries is the per capita GDP, but this is not a reliable indicator of a country’s economic welfare. One reason is that it is possible for a country with a relatively high GDP to have a relatively low per-capita GDP if it has a large .
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