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GDP Worksheet

This document provides information about calculating GDP, including its components of consumption, investment, government spending, and net exports. It gives examples of how various economic activities would fit into each component. The document also distinguishes between nominal GDP, which does not account for inflation, and real GDP, which uses a base year's prices to remove inflation's effects. Calculating both nominal and real GDP for two example years shows how inflation can cause nominal GDP to overstate real economic growth. Additional information beyond nominal GDP growth is needed to determine if an economy experienced real economic growth in a given year. GDP alone is not a complete measure of standard of living, which should also consider factors like health, education, political freedom.

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281 views2 pages

GDP Worksheet

This document provides information about calculating GDP, including its components of consumption, investment, government spending, and net exports. It gives examples of how various economic activities would fit into each component. The document also distinguishes between nominal GDP, which does not account for inflation, and real GDP, which uses a base year's prices to remove inflation's effects. Calculating both nominal and real GDP for two example years shows how inflation can cause nominal GDP to overstate real economic growth. Additional information beyond nominal GDP growth is needed to determine if an economy experienced real economic growth in a given year. GDP alone is not a complete measure of standard of living, which should also consider factors like health, education, political freedom.

Uploaded by

Closu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ECONOMICS

GDP Worksheet

A. Components of GDP: Fill in the blank with the component of GDP each of these items would fit into.

1. ________________________ A mechanic repairs a transmission.

2. ________________________ A business purchases computer software and a PC.

3. _______________________ A local library purchases new audio books.

4. ________________________ A retailer purchases tennis shoes from a Chinese manufacturer


then sells them.

5. _______________________ A mother purchases the same shoes from the retailer.

Write one more example for each of the four components.

6. Consumer Spending
_______________________________________________________________________

7. Investment ______________________________________________________________________

8. Government Spending ________________________________________________________________

9. Net Exports ______________________________________________________________________

10. Explain why the sale of used goods is not included in GDP:

B. Nominal and real GDP


You are an economist who has been asked to calculate your nation’s GDP, which produces only three
goods/services. Calculate nominal GDP for Year 1 and Year 2. GDP = Price x Quantity.

Year 1 Nominal GDP Year 2 Nominal GDP


Good Price Quantity GDP Good Price Quantity GDP
Oil changes $ 15 5 _______ Oil Changes $ 18 6 ______
Hamburgers $ 2 20 _______ Hamburgers $ 3 25 ______
MP3 players $150 3 _______ MP3 players $175 5 ______
TOTAL: _______ TOTAL: ______

11. How much did nominal GDP increase from Year 1 to Year 2? ____________
Now calculate Year 2 real GDP using Year 1 as the base year
(that means you use Year 1 prices to calculate Year 2’s GDP
Year 1 Real GDP Year 2 Real GDP (Year 1 base year)
Good Price Quantity GDP Good Price Quantity GDP
Oil changes $ 15 5 _______ Oil Changes $ 15 6 ______
Hamburgers $ 2 20 _______ Hamburgers $ 2 25 ______
MP3 players $150 3 _______ MP3 players $150 5 ______
TOTAL: _______ TOTAL: ______

12. How much did Year 2’s nominal GDP overstate GDP in Year 2 when compared to real GDP? ______

13. How much did real GDP increase from Year 1 to Year 2? _______

14. Why is it important to adjust nominal GDP to real GDP to account for inflation?

C. Assume that a country has a closed economy with only three goods/services (no next exports). In a
given year, the economy produces a) three haircuts at $10 each; b) two factory machines at $100 each;
and c) one highway repair that costs $500.

15. What is the total GDP for this economy? ___________

16. What percent of GDP is consumption? ___________

17. What percent of GDP is the investment? ___________

18. What percent of GDP is government spending? ___________

19. Suppose an economy’s nominal GDP increased 3 percent in 2008. Why is this information alone not
enough to determine whether the economy experienced economic growth? What other information would you
need to determine that?

20. Why is GDP not a true measure of the standard of living? What other factors should be considered
when determining a country’s standard of living?

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