Calculation Flashcards

Which of the following best describes the output (production) approach to calculating GDP?

Answer: Summing the market value of all final goods and services produced in a period

The output approach sums the market value of every final good and service produced within a country's borders during the period.

Real GDP per capita grew from $55,000 to $57,200. What was the approximate growth rate?

Answer: 4%

Growth rate = ($57,200 - $55,000) / $55,000 × 100 = $2,200 / $55,000 × 100 = 4%.

Which scenario involves 'double counting' that the value-added method avoids?

Answer: Adding flour sales and bread sales separately to GDP

Adding both flour and bread sales would count the flour's value twice; the value-added method avoids this by counting only each stage's added value.

A country reports GDP of $2T in 2020 and $2.2T in 2021 (both in 2020 dollars). What does the $0.2T increase represent?

Answer: Real economic growth, since the values are already inflation-adjusted

Because both figures use 2020 dollars (real GDP), the $0.2T difference reflects actual growth in output, not just price changes.

Which adjustment converts GDP to GNI (Gross National Income)?

Answer: GDP + Net factor income from abroad

GNI = GDP + Net factor income from abroad (income earned by residents abroad minus income paid to foreigners domestically).

Depreciation (consumption of fixed capital) is subtracted from GDP to arrive at:

Answer: Net Domestic Product (NDP)

NDP = GDP - Capital Depreciation, representing net output after accounting for worn-out or obsolete capital.

Country A has C = $6T, I = $1.5T, G = $2T, X = $0.8T, M = $1.2T. Its GDP is closest to:

Answer: $9.1T

GDP = $6T + $1.5T + $2T + ($0.8T - $1.2T) = $6T + $1.5T + $2T - $0.4T = $9.1T.