Emre theme 2

• What does GDP stand for?

  Gross Domestic Product
• What is the definition of GDP?

  Total market value of final goods produced
• In what currency can GDP be calculated?

  Domestic and international currency
• Why is GDP considered a widely used indicator?

  It compares economic growth of countries
• How is GDP calculated?

  By adding the value of final goods produced
• What are final goods and services?

  Goods sold to the end-user
• What are the three methods economists use to calculate GDP?

  Output, income, and expenditure approaches
• What is the formula for GDP?

  GDP = Σ(PxQ)
• What was the approximate GDP of the United States in 2021?

  Approximately $22.7 trillion
• What does an increase in exports indicate for a country's GDP?

  It results in increased economic activity
• How does a surge in demand for tech products affect GDP?

  It increases production and trade, raising GDP
• What does GDP include regarding production?

  Only finished products to avoid double counting
• Who does GDP include in its calculations?

  Local citizens and resident foreigners
• What time frame does GDP cover for production?

  Goods and services produced in one year
• What does GDP exclude from its calculations?

  Goods produced in the previous year
• What type of markets does GDP include?

  Official markets for traded goods and services
• What are some limitations of GDP as a measure?

  It excludes non-market activities and income distribution
• What does the output approach calculate?

  Market value of all final goods produced
• What must be avoided when using the output approach?

  Double counting of output
• How is 'value added' defined?

  Difference between product price and raw material cost
• How would you calculate GDP using the output approach for cars and computers?

  Multiply units by prices and sum values
• What is the formula for calculating national output (GDP)?

  National Output (GDP) = ∑ PxQ
• What does the income approach measure?

  All incomes earned in producing output
• What are transfer payments?

  Income transfers not in return for goods
• How would you calculate GDP using the income approach for a small country?

  Add up all income earned by production factors
• What does the income approach capture that the output approach may miss?

  Income from rental properties and investments
• What is a limitation of the income approach?

  Relies on self-reported data and estimates
• What does the expenditure approach calculate?

  Spending of all sectors on finished output
• How would you calculate GDP using the expenditure approach for a country producing cars?

  Add consumer, government, and investment spending
• What are the four major components of expenditure in GDP calculation?

  Consumer, investment, government spending, net exports
• What is one advantage of the expenditure approach?

  Provides a comprehensive picture of the economy
• What is a disadvantage of the expenditure approach?

  Assumes all money spent is for final goods
• What is nominal GDP?

  Market value of goods at current prices
• How is nominal GDP calculated?

  Using current market prices of goods
• What is a key limitation of nominal GDP?

  It does not account for inflation
• What is real GDP?

  Nominal GDP adjusted for price level changes
• Why is real GDP important for economic comparisons?

  It reflects changes in output over time
• How is real GDP calculated?

  Using base year prices to adjust output
• What does real GDP allow economists to see?

  Actual growth or contraction of the economy
• What is the significance of using a base year in real GDP calculations?

  It helps remove the effect of inflation