01
Front
What does GDP measure?
Back
GDP is the market value of final goods and services produced within a country’s borders during a specified period.
Free Online Flashcard Deck
1 Measuring Economic Output Free Online FlashCards
Study 1 Measuring Economic Output with 12 free online flashcards. Review key terms, definitions, and concepts with this interactive flashcard deck.
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02
Front
What does “domestic” mean in GDP?
Back
GDP counts production where it takes place, regardless of who owns the producer. Production at a foreign-owned factory inside the United States counts in U.S. GDP.
03
Front
Why does GDP count the bread sale, not the flour too?
Back
GDP counts the bread’s final sale, not the flour separately. The flour’s value is reflected in the bread’s price, preventing double-counting.
04
Front
What is the expenditure formula for GDP?
Back
The components are consumer spending, investment, government purchases, and exports minus imports: GDP=C+I+G+(X−M).
05
Front
Why are imports subtracted in the GDP formula?
Back
Imports are subtracted because GDP measures production within the country, while imports were produced abroad.
06
Front
Why is unpaid household work generally excluded from GDP?
Back
Unpaid household work and volunteer work are generally excluded because they are not exchanged in a market and are difficult to value consistently.
07
Front
What does GDP reveal about the distribution of income?
Back
GDP does not show how income or output is distributed. It can rise even when gains go mainly to a small share of the population.
08
Front
Why can rising GDP fail to show environmental costs?
Back
GDP is not a direct measure of quality of life. Production that causes pollution can raise GDP even though the pollution creates costs GDP does not directly subtract.
09
Front
Does selling a used car count as new GDP production?
Back
A used-car sale generally is not new production, so it is excluded. A fee for a newly provided service related to the sale may count.
10
Front
How is nominal GDP valued?
Back
Nominal GDP values production using the prices of the period being measured, so it can rise because output increases, prices rise, or both.
11
Front
How does real GDP improve comparisons over time?
Back
Real GDP adjusts for price changes, making it more useful than nominal GDP for comparing the volume of production over time.
12
Front
Why isn’t real GDP just a count of physical items?
Back
Real GDP is not simply a count of physical items: goods and services vary in type and quality.
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