Exam 7: A: Measuring the Economys Output

Net investment can be positive, negative, or zero, but gross investment can never be less than zero.Explain.

The following is a list of figures for a given year in billions of dollars.Using this data, compute: (a) GDP by the Expenditure Method; (b) GDP by the Income Method; (c) Net exports; and (d) Net Investment.

What are the two basic ways of deriving real GDP from nominal GDP?

The next four questions refer to the following price and output data over a five-year period for an economy that produces only one good.Assume that year 2 is the base year. (a) If year 2 is the base year, give the price index for year 3.(b) Give the nominal GDP for year 4.(c) What is the real GDP for year 4? (d) Tell which years you would deflate nominal GDP and which years you would inflate nominal GDP in finding real GDP.

Why is GDP a monetary measure?

Explain what is and what is not included in government purchases in GDP.

Differentiate between nominal and real GDP.

The following table shows the price of a specific stereo receiver for a five-year period.Using Year 3 as the base year, calculate the price index for each year.

Of what use is national income accounting to economists and to policy makers?

Define GDP and its characteristics.