Macro-C1,2 National Income Stat.

Question 1

Define Gross Domestic Product. (GDP)

Answer 1

• GDP is the measure of total market value of final goods and services produced by all resident producing units of an economy over a specified time period (currently).

Question 2

What is the difference between final goods & intermediate goods?

Answer 2

• Final goods are used for final use/consumption.
• Intermediate goods are used as inputs for production.

Question 3

Define resident producing units.

Answer 3

• RPUs of an economy are individuals or organisations that maintain a centre of economic interest in the economy. (i.e. they engages or intent to engage in economic acitivities mainly in the economy over the specified period)

Question 4

Briefly describe the 3 approaches to measure GDP.

Answer 4

• Production Approach (Value-added)
  
  • measures the total value created by production of final goods and services.
  • results in “GDP at factor cost”
• Expenditure Approach
  
  • measures the total expenditure spent on final goods and services.
  • results in “GDP at market price”
• Income Approach
  
  • measures the total factor income arising from the production of final goods and services. (details not covered)

Question 5

Describe and illustrate the production approach to measure GDP.

Answer 5

• GDP at factor cost = sum of value-added in all production stages.
• value added = value of output (exluding tax/subsidy) - vlaue of intermediate goods used (inputs)

Question 6

List the components of GDP in expenditure approach.

Answer 6

• GDP = C + I + G + X - M
  
  • C: Private consumption expenditure
  • I: Gross investment expenditure
  • G: Government consumption expenditure
  • X: Exports
  • M: Imports

Question 7

What are covered in private consumption expenditure (C)?

Answer 7

• It is the total expenditure of all households in an economy on currently-produced final goods and services:
  
  • consumption expenditure of households on final goods and services
  • expenditure on final goods and services on non-profit institutions serving households.

Note: expenditure on used/second-hand goods is not included to avoid double counting.

Question 8

What are covered in gross investment expenditure (I)?

Answer 8

• Gross investment expenditure =
  
  • gross domestic fixed capital formation (GDFCF) + change in inventories
• Gross demostic fixed capital formation =
  
  • net domestic fixed capital formation (NDFCF) + depreciation / capital consumption allowance
  • it includes:
    
    • expenditure in real investment on construction
    • transfer costs (legal fees, commissions, etc.)
    • depreciation/capital consumption allowance
      *