GDP and the Standard of Living

 5.3   Distinguish between nominal GDP and real GDP and define the GDP deflator.

 5.4   Explain and describe the limitations of real GDP as a measure of  the standard of living.

 5.3   Distinguish between nominal GDP and real GDP and define the GDP deflator.

A.  Nominal GDP is the value of production using the prices of the current year and the quantities produced of the current year.
B.  Real GDP is the value of production using the prices of a base year and the quantities of a current year.
C.  Changes in real GDP measure changes in production.  Changes in nominal GDP combine changes in both production and prices.
D. The GDP deflator is the ratio of nominal GDP to real GDP (multiplied by 100).
 

 5.4   Explain and describe the limitations of real GDP as a measure of  the standard of living.

A.  Real GDP per person is a major indicator of the standard of living.
B.  Real GDP omits household production, underground production, leisure time, environment quality, health and life expectancy, and political freedom and social justice.
C.  Broader indexes of the standard of living such as the Human Development Index, take some of these omitted factors into account.

Take the optional post-study bonus point quizzes on GDP and the Standard of Living on Saturday following Module 7.

Take the optional pre-study bonus point quizzes on Jobs and Unemployment on Sunday preceding Module 8.