There are probably a thousand macro economic indicators, some measure the overall national economy, some are more limited in scope. The three most often quoted and publicized are the Gross Domestic Production Index (GDP), the Consumer Price Inflation Index (CPI) and the Unemployment Index. Please complete the short answer questions regarding these three indicators:
1. Use the table below:
| |
Value (in billions)
|
|
Personal consumption expenditures
|
$1,000
|
|
Gross private domestic investment
|
$500
|
|
Net exports
|
$300
|
|
Imports
|
$180
|
|
Government purchases of goods and services
|
$280
|
|
Transfer Payments
|
$90
|
a. What is the value of GDP?
b. In each of the following cases, indicate if GDP is affected, under what category and what happens to GDP. Be sure to explain why or why it is not included.
- You buy a used textbook from one of your classmates.
- You buy a new umbrella.
- Ella, a French tourist, has a haircut in a salon in San Francisco.
- Oklahoma cleans up after a devastating tornado.
- A pension payment to a retired military person
2. Why do some people gain and other people lose from inflation and deflation?
3. Define the natural rate of unemployment. Identify three factors that may cause the natural rate to change over time.
4. What is structural unemployment? State the various reasons due to which it can arise in an economy.