What the GDP measures, if anything, has become quite the issue in the digital age. Consider this data:
In 2012, U.S. Real GDP was $15,345.63 billion and Real Per Capita GDP was $48,842 billion.
Five years later, at the end of 2017, U.S. Real GDP was $17,096.18 billion and Real Per Capita GDP was $52,446 billion. (All data was extracted May 20, 2018, from FRED https://fred.stlouisfed.org/.)
Read this blog, GDP: Falling Short, to help you answer this week’s discussion questions.
Reply to these questions in your response:
- Considering the data above, did the U.S. make progress? Explain your answer.
- Given what you know now about economics, should the measure of GDP be changed? Why or why not?
Talk with a peer:
- Review a peer’s post and let him/her know if you agree or disagree with their reasoning about U.S. progress or the measure of GDP.
Please read the weekly materials before answering the discussion question. This week’s question addresses two issues as you are to make a case for the weak or strong economic stance of the United States by addressing the issues below:
- Is the US economy making progress (please support your response on the basis of the data)?
- Do you feel that GDP is valuable in understanding our country’s economic strength? Explain why or why not.
When addressing the issues raised by this week’s discussion, keep in mind the following historical tables provided to you for this discussion may be used to support your response. You may also go to the Bureau of Economic Analysis at www.bea.gov Navigate on the home page to where it states “National,” then select “Gross Domestic Product”. Next, select “GDP and the National Income and Product Account (NIPA) Historical Tables”. The direct Web address is http://bea.gov/national/index.htm#gdp
It is noteworthy that this discussion forum is ripe for the use of government statistics and reports. Students should peruse the latest reports to put this discussion forum in a better context. The GDP consists of four components: consumption, investment, government purchases, and net exports. Using the expenditure approach, GDP is divided into Consumption, Investment, Government Purchases, and Net Exports.
Consumption expenditures are purchases of newly produced goods and services by households. The three categories of consumption are durables, nondurables, and services.
Private investment expenditures are defined as purchases of newly produced goods and services by firms. The three components are: the spending by firms on new plant and equipment, purchases of new residences, and net additions to inventory; Gross investment is total new investment expenditures, whereas net investment is gross investment minus depreciation; and Depreciation is the reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence; also called capital consumption allowance.
Government purchases include purchases of newly produced goods and services by local, state, and federal governments. Government purchases exclude transfer payments, defined as payments from governments to individuals that do not correspond to the production of goods and services (unemployment benefits are an example).
Net exports, which are import: A good produced in a foreign country and purchased by residents of the home country. For example, the United States buys televisions that are produced in Japan. This is an import for the United States; Export: A good produced in the home country and sold in another country; Net exports are defined as exports minus imports. It is noteworthy that the United States has run a trade deficit for more than the past decade, as imports have outpaced exports. A trade deficit is the excess of imports over exports. A trade surplus is the excess of exports over imports. When discussing how our trade accounts have occasionally been balanced; we note that the United States has had a negative balance of trade for much of the past half century.
Class: What is the difference between real GDP and nominal GDP and how are these two indicators measured?
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