Economics 7: Introduction to Macroeconomies Asatar Bair, Ph.D salacbain .edu In-

Question

Economics 7: Introduction to Macroeconomies Asatar Bair, Ph.D salacbain .edu In-class Exercise: The concept of Gross Domestic Product Discuss the following questions with your team. After your discussion, write down your own answers to each question on this sheet. (Use the back if you need more space.) (1) What does Gross Domestic Product (GDP) measure? (2) Does GDP include: The value of imported goods The informal sector (also called the underground economy) Non-market goods and services Intermediate goods Electronics such as computers and cell phones A forest ecosystem-No (3) In the textbook, it is said that GDP counts "bads" as "goods". What does this mean? (4) About 100 years ago, an economist made the following statement: "If a man marries his housekeeper, the total economic product (GDP) goes down. - Arthur Pigou What is Pigou assuming here, and what does his statement tell us about what is counted and what is not counted in GDP, even today? (5) Why might it seem that a natural disaster that destroys homes, buildings, and crops is good for the economy? (6) Imagine an economy that produces two goods, pencils and erasers. The pencils are made df wood and graphite, and the erasers are made of rubber. Calculate the total GDP in this simple economy from the following table. Good or Service Pencil Eraser Rubber Wood Price (per unit) Quantity Total S1.00 51.25 530lb 100,000 1,000 lb 1,000 ft ,000 t Total GDP Graphite sio/ft

Explanation / Answer

1. GDP measure the total output of an economy during a specified period of time or in other words it is the total value of all the goods and services produce within the domestic boundry during an specified period of time.

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