Discuss how GDP is measured by the BEA each quarter. Why economists assumeaggregate expenditure equals to aggregate income in the economy?
Examine the current GDP report (that is available at www.bea.gov ) and identify four keycomponents of GDP.
What components of GDP (if any) would each of the following transactionsaffect. Explain.
A family buys a new regrigeratorAunt Jane buys a new houseYou buy a pizzaYour parents buy a bottle of French wineFord sells a Mustang from its inventoryHonda expands it factor in Marysville, OhioYou provide a loan to your cousinA butcher buys wholesale meatThe government provides one time tax rebateYou buy a CD from a second hand store
Below are some data from the land of milk and honey.
Quantity ofMilk100 quarts200200
Compute nominal GDP, real GDP and the GDP deflator for each year, using 2008as the base year.
Compute the percentage change in nominal GDP, real GDP and the GDP deflatorin 2009 and 2010 from the preceding year. For each year, identify the variablethat does not change. Explain in words why your answer makes sense.
Did economic well-bring rise more in 2009 or 2010? Explain.
Discuss why GDP is not a good measure of economic well being. Review the followingNY Times article on Alternatives to the GDP http://economix.blogs.nytimes.com/2008/10/30/alternatives-to-the-gdp/ and recommend what specific alternative should be usedinstead of GDP.