Question

Could you please help me to answer these questions with typing or clear writing! Thank you very much!

Learning Outcomes 5b & 5c-GDP measurement CP b) i. For the year ending 2017 household spending was $160 bilion, Government expenditure was $50 billion, investment was $65 billion, exports were $75 billion and imports were also $75 billion. Calculate the GDP. Source: Statistics NZ 15 March 2018 (1 mark) i. The GDP you calculated above is the Nominal GDP. To calculate the Real GDP you adjust by the Consumer Price Index (CPI). Briefly describe the CPI and how it is calculated. (2 marks) ii GDP has been criticised by many. Outline two criticisms of GDP as an economic measure and/or as a measure (4 marks) of economic welfare

Answer 1

b)

i)

GDP = Consumption + Investment + Government expenditures + ( X - M)

GDP = $ 160 billion + $ 65 billion + $ 50 billion + ( $ 75 billion - $ 75 billion )

GDP = $ 275 billion

_______________________________________________________________________

ii)

The Consumer price index is defined as a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

The consumer price index is constructed using the prices of a sample of representative items whose prices are collected periodically.

____________________________________________________________

iii)

As a measure of economic measure, GDP does not include underground economic activity and GDP does not capture non monetary activities including unpaid and voluntary work.

As a measure of economic welfare, GDP does not capture wealth distribution and GDP does not include social opportunity costs. Without considering social opportunity costs, GDP provides no indication whether current growth could actually be undermining future growth.