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Chapter 8: Q. b For critical thinking (page 171)
Why might a range of dashboard economic indicators be difficult to include in one single measure such as GDP?
The greatest investors combine many economic indicators to obtain insight into patterns and verifications among multiple sets of data. Indicators provide road signs.
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Why might a range of dashboard economic indicators be difficult to include in one single measure such as GDP ?
Suppose that in Figure 8-1, the sum total of all the goods and services produced during the relevant period-pairs of shoes, candy bars, digital devices, etc., all summed together-is 500 trillion units. The total dollar value of this flow of output is $20 trillion. The total amount of factors of production-labour, land, capital, entrepreneurship, all summed together-is 1 billion units. What is the flow of income-that is, the sum of wages, rents, interest, and profits?
Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends on magazines to get ideas about wall textures and paint shades, on newly produced texturing materials and tools, on new paintbrushes and other painting equipment, and on newly produced paint. Normally, she preps the walls, a service that a professional walltexturing specialist would charge to do, and applies two coats of paint, a service that a painter would charge to do, on her own.
a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?
b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?
c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?
Consider Figure 8-4. Explain what is special about the year at which the two data plots cross, and why this is so.
Based on the information in Table , in what years was the economy in a recession? Explain briefly.
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