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Discussion on Economic Indicators

How is the Economy Doing?

Required Reading:

Bouman, John. () Principles of Macroeconomics. "Unit 3: Gross Domestic Product" Retrieved from: http://www.inflateyourmind.com/pdfs/macroeconomics.pdf

Groshen, Erica and Simon Potter. (2003) "Has Structural Change Contributed to a Jobless Recovery?" Current Issues in Economics and Finance. NY Federal Reserve. New York. 9(8). Retrieved from: http://www.newyorkfed.org/research/current_issues/ci9-8/ci9-8.html

Note: Please address each question separately.

1. What is the difference between a final good and an intermediate good? Give one example of each. How are they treated in GDP calculations?

2. True/False Statements. Indicate if the statement below is True or False. You must support your answer with a few sentences for each statement.
a. Government expenditure is the largest single category of GDP.
b. Nominal GDP uses current market prices and real GDP measures GDP using base-year prices.
c. GDP increases if you purchase General Motors stock.

3. Define the natural rate of unemployment. Identify three factors that may cause the natural rate to change over time.

4. Read the article and address the question below:

http://www.newyorkfed.org/research/current_issues/ci9-8/ci9-8.html

Why do you think structural unemployment delays economic recovery more than does cyclical unemployment?

Solution Preview

SUGGESTED DISCUSSIONS

1.What is the difference between a final good and an intermediate good? Give one example of each. How are they treated in GDP calculations?

Final good is a commodity or product or services that has already reached final consumption by the ultimate consumer and that further processing is not anymore possible.

Intermediate good may refer to products or services that can be further processed. This is a good that has not reached yet final consumption.
Example of final good: Food from McDonald's eaten by the customers.

Example of intermediate good: Logs extracted from the forest and delivered to sawing mills. Logs are further processed in the sawing mills to produce fine lumber.
GDP counts only products or services that are considered final goods. Intermediate goods are not counted as part of the GDP. Doing so is tantamount to double or even triple counting. It has to be counted when they are used, offered, or sold as final commodity to the ultimate consumers.

2. True/False Statements. Indicate if the statement below is True or False. You must support your answer with a few sentences for each statement.

a. Government ...

Solution Summary

The solution discussion various economic indicators such as government expenditure, GDP, natural rate of unemployment, and structural unemployment.

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