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Section 5 Lecture 1
2,702
Lecture 1
Q1
What is the purpose of GDP?
Goal of GDP
Try Again!
The goal of GDP is not to measure prices in the economy. GDP does measure goods at their market value, but this is not the goal.
To measure prices in the economy.
Try Again!
The goal of GDP is not to measure employment in the economy. GDP is influenced by employment, but measuring workers is not the goal.
To measure the amount of workers.
Correct!
The goal of GDP is to measure output of a country. The purpose of the economic indicator is to compare how output changes over time and varies across countries.
To measure output.
Q2
Determine whether each of the goods and services would be included in GDP. Answer yes or no for each.
Included in GDP?
No!
Since Joan does her own laundry there is no market value. No transaction is occurring in this situation so there is no effect on GDP.
Joan does her own laundry using the washer and drier in her apartment unit.
Yes!
Since Marcus must pay to use the laundry machines, the transaction is included in GDP. The amount that Marcus pays for the washing machine and dryer are included in GDP.
Marcus takes his laundry to the laundry mat and pays $1.50 a load.
Yes!
Angie pays a laundry service to pick up, clean, and drop off her laundry.
Since Angie is using a laundry service the amount that she pays for the pick-up, cleaning, and delivery are included in GDP.
Q3
Determine whether the following goods are included in GDP?
Answer Yes or No for each option.
Included in GDP?
No!
A newspaper producer purchases ink for the printers
Ink is an intermediate good in the production of newspapers. Once the ink is used to produce one newspaper it cannot be used again. It is considered an direct input, not a capital good so therefore, not included in GDP.
Yes!
A printing machine is considered a piece of capital for the firm. It is used to produce many newspapers. The printer would be included in GDP.
A newspaper producer purchases a new printing machine
Yes!
The car would be included in GDP. Since the car is used to produce many newspapers (through many stories) than it is considered a piece of capital and therefore included in GDP.
A newspaper producer purchases a new car for journalists to use when researching stories.
Q4
Determine whether the following goods are included in GDP for the United States?
Answer Yes or No for each option.
Included in GDP?
Yes!
Since Otto is producing goods in the United States it is included in GDP. It does not matter if he is selling domestically or abroad, since the production occurs in the U.S. it is included.
Otto produces jewelry in Ohio to sell in the U.S. and abroad.
Yes!
The jams and jelly are considered an export. They are included in GDP since it does not matter who purchases the good, only that is produced in the United States.