Background Material


Basic Concepts

1. What is GDP?

 
2. What are the major expenditure components of GDP?

 
3. What are stylized facts?

 
4. List some stylized facts about GDP.

 

 Answers
5. If  X  denotes an economic indicator, what is the interpretation of  DlnX?

 
6. What explains GDP?

 
7. What determines how total output gets divided?

 

 

National Income Accounting

1. Indicate whether each of the following transactions is included in GDP, and explain why.
a. welfare payments
b. a used office building purchased by a high-tech firm
c. semiconductors produced by a U.S. firm but sold to a firm in Hong Kong
d. a report written by a sociology professor for the Department of Health and Human Services Answers
e. a new General Motors car purchased by Avis
f. the transportation services this car provides to Avis customers
g. the transportation services of an identical car owned and used by Mr. Smith

 

Problems and Data Exercises

1. The Excel file growthacct.xls contains annual data on real GDP, the capital stock, and aggregate labor input for the United States from 1896 through 1992.  Using this file, calculate the growth rate of real GDP in two ways
  • the discrete percentage change:  (GDP(t) - GDP(t-1))/GDP(t-1)
  • the continuously compounded growth rate:  ln(GDP(t)) - ln(GDP(t-1))

Compare the two growth rate variables to convince yourself that they are very similar to each other.  Besides looking at the listing of the variables in the spreadsheet, you might want to graph them and compute the correlation coefficient.

 
2. Answer questions 1 and 2 from Exercise 1, contained in a pdf file.