2 Backround Essay Questions and Answers 1. What are examples of things that are included when GDP is calculated?Examples include iPhones, haircuts, Starbucks coffee, and highway tolls.
3 Backround Essay Questions and Answers 2. What is the possible danger if a country’s GDP expands too rapidly over time?The country might experience inflation (price increases).
4 Backround Essay Questions and Answers 3. What is the danger if a country’s GDP contracts over time?If a country’s GDP contracts, the country might be headed toward a recession, which would mean that businesses will close and workers will lose their jobs.
5 Backround Essay Questions and Answers 3. What is the danger if a country’s GDP contracts over time?If a country’s GDP contracts, the country might be headed toward a recession, which would mean that businesses will close and workers will lose their jobs.
6 Background Essay Questions and Answers 4. Name three adjustments that can be made to GDP to allow for better comparisons over time and between countries.1) One adjustment is real GDP, which accounts for inflation.2) second adjustment is PPP, which accounts for differences in currency values3) • A third adjustment is GDP per capita, which accounts for population and allows for comparisons between big and small countries.
7 Background Essay : 5 Define Terms: Gross domestic product (GDP):the total dollar amount of all goods and services produced in a country in one yearbusiness cycle:the increases and decreases in GDP that occur over time within a countryexpansion:a time period when GDP is increasing in a country. It usually means more people have jobs and are buying more goods and services.
8 Background Essay : 5 Define Terms: inflation: an increase in the average price of goods and services within a countrycontraction:.a time period when GDP is decreasing. It usually means businesses will close or lay off workers and individuals will buy fewer goods and services.
9 Background Essay : 5 Define Terms: Recessionwhen the economy stays in contraction for more than six months, the economy is officially in a recession. Businesses close or lay off workers. People generally purchase fewer goods and services.Real GDPAn adjustment to GDP that accounts for changes in prices (inflation) occuring over time. This allows for long-term GDP comparisons.
10 Background Essay : 5 Define Terms: Purchasing power parity (PPP):an adjustment to GDP that takes into account the relative value of different countries’ currencies. This allows for GDP comparisons between countriesGDP per capita:an adjustment to GDP in which the total dollar amount of GDP is divided by the country’s population. This provides a dollar amount of GDP for each person in the country, and allows for GDP comparisons between countries of varying populations.Negative ExternalitiesAn undesirable consequence not included in GDP; example : Pollution
11 Doc A1) Why do the authors compare GDP to a satellite that surveys weather from space?A satellite can observe weather across a large area at one time, similar to how GDP captures a large amount of economic activity in one measure.
12 Doc A2) Samuelson and Nordhaus say there is a possible connection between GDP and a recession. What is that connection?If GDP is decreasing, the economy is contracting and might be headed toward a recession.More specifically, a decrease in GDP means fewer goods and services are produced, which means workers are laid off, which means less consumer spending, which means lower GDP.
13 Doc A3) possible connection between GDP and inflation. What is that connection?If GDP is increasing, the economy is expanding and might experience an inflationary period.More specifically, with expansion comes the need for more workers, which means more wages are paid, which means a greater demand for goods, which enables stores to raise prices, which may lead to inflation .
14 Doc A4) What useful information does GDP provide for policymakers (i.e. president, Congress, Federal Reserve Bank)?It shows whether the economy is growing or shrinking and whether policymakers would need to “boost” or “reign in” the economy. It also allows policymakers to work with a concise, organized measure.
15 Doc A5) How does this document help answer the question, “Does GDP tell the right story?”Samuelson and Nordhaus note that GDP provides one measure that captures an entire nation’s economic activity.The quote also suggests that, without this measure, policymakers would not have an accurate general picture ofthe economy. They might clearly see individual trees but have a poor sense of the forest.
16 Doc B1) This chart uses GDP data that is listed in terms of purchasing power parity (PPP). Why would economists use PPP when giving GDP data?Economists use PPP to adjust for the value of currencies used by different countries.
17 Doc B2)This chart does not adjust for inflation over time by reporting “real GDP” numbers. Why does that exaggerate the growth in GDP that these nations show in the document?The growth in GDP is exaggerated in this chart because prices tend to increase over time and GDP is a measure of the total price of all the goods and services produced in a nation. A nation’s GDP can increase, in part, because of the increase in prices. This can be misleading.
18 Doc B3) According to the chart, which nation has the highest GDP in each of the three years shown? In each instance, record the GDP adjusted for PPP. (Be careful with your zeroes.)1980 – United States, $2,862,000,000,0002000 – United States, $10,285,000,000,0002015 – China, $19,524,000,000,000
19 Doc B4) How does this document help answer the question, “Does GDP tell the right story?”The document shows how GDP data can be used to make easy comparisons across countries and over a period of time. It also shows that GDP numbers can be adjusted to reflect purchasing power differences in different currencies.
20 Doc C 1. What is the meaning of “GDP per capita”? GDP per capita is the total gross domestic product of a nation divided by its population.
21 Doc C2. According to the chart, which nation has the highest GDP per capita in each year shown? Which nation has the lowest?Highest: Qatar (1980, 2000, 2015) Lowest: China (1980), India (2000, 2015)
22 Doc C3. Refer to both Document B and Document C. In each chart, what is the world rank of Qatar? What explains the difference in Qatar’s rankings?In Document B, Qatar’s GDP ranking is 50. In Document C, Qatar’s ranking jumps to 1. This is because its low population divides a lot of wealth.
23 Doc C4. How does this document help answer the question, “Does GDP tell the right story?”The document shows how GDP can be used to make easy comparisons across countries and over a period of time. However, GDP per capita does not tell us how the GDP of a country is distributed. GDP per capita is simply an average.For example, Qatar could have some very poor people if GDP is unequally distributed. Therefore, more information on income distribution is required.
24 Doc D1.) What two measures is this graph correlating? (Hint: Read the X and Y axes)On the X axis, the graph is displaying the household GDP for five countries— United States, Germany, South Korea, Mexico, Indonesia. Household GDP is adjusted for both inflation and purchasing power parity (PPP).
25 Doc D2) Between 1980 and 2011, what was the correlation, that is, the relationship, between household GDP and the Human Development Index for the United States?Both HDI and household GDP grew over the 30-year period. That is, there is a positive relationship between HDI and GDP.
26 Doc D3) Between 1980 and 2011, what was the relationship between household GDP and the Human Development Index for Indonesia?Both HDI and household GDP grew over the 30-year period. There is a positive relationship between the two.
27 Doc D4) What generalization can you make about the correlation between household GDP and life expectancy/education in all five countries?There is a positive relationship between household GDP and life expectancy/ education in all five countries. This relationship is especially positive in Indonesia and Mexico.
28 Doc D5) How does this document help answer the question, “Does GDP tell the right story?”This document could be used to demonstrate that there is a correlation between a country’s overall production and life expectancy/education. This means that GDP is telling a larger story than one might think. As individuals gain access to more goods and services, they appear to live longer lives and become better educated. In other words, beyond being merely an economic measure, GDP is an indicator of quality of life. It comes closer to telling a fuller, “right” story.
29 Doc E1.) According to Robert Kennedy, what was the United States’ gross national product in 1968?More than $800 billion dollars a year
30 Doc E 2.) List five things that GNP includes, according to RFK. Cigarette advertising; ambulances to clear highways of carnage; special locks for our doors; jails; Whitman’s rifle and Speck’s knife; television shows that glorify violence .
31 Doc E 3. List five things that GNP does not include, according to RFK. children’s health; quality of education; children’s play time; poetry; strength of our marriages; integrity of our public officials; courage; wisdom; compassion; patriotism
32 Doc E4. What might Kennedy think about the positive relationship between GDP and the happiness index shown in Document D?Kennedy would probably admit that an increase in GDP does have some positive outcomes, including education level and life expectancy. However, as he so eloquently points out with his examples, GDP misses a lot of what goes into a good life.
33 Doc E5) How does this document help answer the question, “Does GDP tell the right story?”Kennedy does not believe that GNP (GDP) tells the right story. He states that GNP “measures everything, in short, except that which makes life worthwhile.” He is making the point that GNP can measure the amount that the country produces but it can’t measure the quality of life for Americans.
34 Doc F 1) What does the Social Health Index measure? The Index of Social Health measures the social well-being of the nation. It includes an evaluation of 16 items, such as rates of infant mortality, number of high school dropouts, and the unemployment rate.
35 Doc F 2) What does the real GDP graph measure? It measures the gross domestic product of the United States in 2011 dollars from 1970 to 2011.
36 Doc F3. What generalization can you make about the relationship between the Index of Social Health and US real GDP during the period from ? Provide evidence from the document that supports this generalization.Generally, there is an inverse relationship between the two. That is, while real GDP increased significantly during these 41 years, from about $5 trillion in 1970 to about $15 trillion in 2011, over the same years, the Social Health Index showed an actual decline, with nine indicators out of 16 showing lack of progress.
37 Doc F4. How does this document help answer the question, “Does GDP tell the right story?”This document could be used to demonstrate that GDP oversimplifies our progress as a nation. On one hand, the overall production of goods and services has increased over time in the United States.On the other hand, the Index of Social Health reveals another story— that is, the US rates of child abuse, child poverty, teenage suicide, to name just three, have worsened during the same period that real GDP has shown significant gains.
38 Doc G1) What series of events are displayed in these photos? That is, summarize the photo story in your own words.The photos show the impact of an oil spill in the Gulf of Mexico. The photos show an oil rig exploding, oil leaking into the ocean, damage to wildlife, and people cleaning up beaches after the spill.
39 Doc G2. Economists refer to the impact of the Deepwater Horizon disaster as a “negative externality,” an undesirable consequence not included in GDP. What specific negative externalities are suggested or revealed by either the pictures or text?An estimated 27,000-65,000 sea turtles died; dolphins died at a very high rate; 12 percent of brown pelicans in the Gulf of Mexico died; an oil rig was destroyed; a huge oil slick contaminated the Gulf.
40 Doc G3. Which of the numbers in the document are included in GDP totals? Explain.The clean-up costs of the spill are included in GDP. For example, clean-up efforts involved the hiring of individuals and companies to remove the oil from the beaches and Gulf of Mexico. These services are accounted for when calculating GDP.
41 Doc G4. Which of the numbers in the document are not included in GDP totals? Explain.$2.5 billion in lost fishing revenue and $23 billion in lost tourist dollars. The animals that perished, the lost revenue, and the 11 lives lost are also not included in GDP. GDP only measures the dollar amount of goods and services produced, not the value of goods and services lost.
42 Doc G5) How does this document help answer the question, “Does GDP tell the right story?”This document demonstrates that GDP oversimplifies a country’s economic growth, as it does not properly account for negative externalities. For example, it would not account for lost revenue (or production) or the environmental impacts of catastrophic events like oil spills.- Make connection to “Ecological Services” reading….
43 Doc H1) What is a quintile?A quintile is one-fifth of a whole.
44 Doc H2. We learned in Documents B, C, and D that real GDP in the United States increased between 1979 and Which quintile groups in the chart benefited from this growth in GDP?The quintile groups that benefited from the growth in GDP were the top three.
45 Doc H3. Which income group on this graph experienced the biggest positive change in income from to 2012?The top 1 percent
46 Doc H4. 4. Which income group experienced the smallest positive change in income from 1979 to 2012?The third, or middle, quintile.
47 Doc H5) 5. Which income groups experienced a negative change in income from 1979 to 2012?The lowest and second-lowest quintiles.
48 Doc H6 How does this document help answer the question, “Does GDP tell the right story?”This document supports the idea that GDP tells an oversimplified story of a country’s economic growth.What GDP does not tell us is how income is distributed. It is very possible for national production to increase while the income of certain groups stagnates or declines. In recent years, GDP growth in the United States has rewarded the rich while bypassing the poor.