348 Module 4 Re-cap

Regarding the Written Assignment Chapter Questions: The National Income Accounts may not be the most interesting thing about Economics, but the data the provide certainly is vital for the economy. Below are some points these questions were trying to raise:

1. The GDP does not show many things. It is simply an aggregate measure of the nation’s output in a year. There is another (subjective) measure that is often used: The Measure of Economic Welfare.

2. If we import more than we export, money flows out of our economy (and somebody has to finance this).

3. Real GDP matters because it is a measure of the real increase in output.

4. The difference is usually very small between GNP and GDP in an economy the size of our’s. However we need to be concerned about the amount “produced” by American firms abroad.

5. True investment is defined as spending by firms that add to its ability to produce goods and services- under that definition, a computer would be an investment good.

6. Consumers need to buy certain goods and services no matter how the economy is doing. Businesses have a choice of when to spend. They are likely to pull back on investment when the economy dips and ratchet up spending when it recovers (procyclical).

7. Consumer spending is tied to how individuals feel about their finances and how they feel about the future- and since consumer spending accounts for 67% of the GDP, it is very significant.

“Original document by Peter Turner licensed CC BY”