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University of Phoenix (online)_ECON205

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Discussion Question 1What are the advantages and disadvantages of using the Gross Domestic Product (GDP) as a measure of productivity and economic health? Explain your answers. The GDP is calculated by real GDP, nominal GDP andGDPdeflator using the four components of consumption, investment, government spending, and net exports.The real GDP relates to changes in the price level, and provides a better figure of the constant dollar. The nominal GDP is an evaluation at current dollar value. So the nominal will include all the changes. The GDP deflator measures the cost of new goods and services by the government, households and firms. The GDP deflator is the nominal divided by the real, then multiplied by 100.The three ways to measure GDP is through total income, total spending and total output of goodsand services for a given period of time. GDP is measured by each individual country. By measuring each country's GDP, the rate of economic growth can be determined.Intermediate goods are considered something that is not completed or assembled yet for sale. Forinstance, Ford orders parts from different countries to be able to assemble a vehicle. Because the product is not assembled or processed yet, it is considered an intermediate good.A final good has to be completely processed and ready to sell before it is considered a final good.For instance, batteries for my camera are considered a final good because it needs no further processing. It is complete.Response 2 The GDP is calculated by the amount each household spends per year on goods and services, then they calculate in the total wages per year brought into the household and factor in rent or mortgage and then they factor in the profit made by the companies after production. These calculations are done either bi-annually, quarterly, or annually. The GDP is separated by three stages Real GDP, Nominal GDP, and the GDP deflator.The Real GDP of a product is determined during the first year on the market, when the price remains constant.The Nominal GDP is usually what the product cost right now at the current time.The GDP deflator is calculated by a ratio of real GDP to Nominal GDP and is determined by price not quantity.An example of an intermediate good would be a truckload of wood.An example of a finished product would be the wood that you buy to do restorations to your homeThe GDP is usually calculated into the price of the finished product.Discussion Question 2Economists use GDP as a measure of economic growth. If the GDP is increasing year over year,does that necessarily mean that the economy is growing? What are the advantages and disadvantages of using the Gross Domestic Product (GDP) as a measure of productivity and economic health? Explain your answers. If the GDP increases year after year, it does not necessarily mean the economy is growing. The economy we are in is an example. Many items still cost as much as they have in the past – and some have gone up in price – while many households have less income due to a loss in jobs or pay cuts. The true picture really does not get measured with the GDP or it can be misleading.An advantage of using the GDP as a measure of productivity and economic health is we can use past data to note any trends in the current time. Using the GDP data might be able to seeif we are headed into a recession or recovery based on past history. We can also use the GDP data to see how we are doing in the international markets; comparisons on quality of life in the U.S. can be measured with other countries.A disadvantage of using the GDP as a measure of productivity and economic health is that the data can be misleading. An example is that if a family decides to sell a car in order to buy groceries or make the mortgage payment, that sale does not get reflected in the GDP since it was included when it was bought new. The GDP doesn’t reflect that American’s are buying lessof any kind of product; it only sees the price and can’t measure the struggles many families are having. Response 2Just because the GDP increases every year it does not mean the economy is growing. If you take a look at the current economy for example, the price of gas and household goods is going up everyday, but the employment rate is still on the decline. The GDP can be very wrong at certain times especially in times like we are in now.An advantage of the GDP is when we try to compare ourselves with other countries like France or Germany. We can learn a lot about our current economic situation by doing these comparisons.A disadvantage of the GDP is that the struggles that average American family is going through atany given time is not calculated into the price of a product. This would cause the price to rise andfall dramatically. In this sense the GDP can be very misleading and not very


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