Critical Thinking Questions

20. U.S. macroeconomic data are among the best in the world. Given what you learned in the Clear It Up “How do statisticians measure GDP?”, does this surprise you, or does this simply reflect the complexity of a modern economy?

21. What does GDP not tell us about the economy?

22. Should people typically pay more attention to their real income or their nominal income? If you choose the latter, why would that make sense in today’s world? Would your answer be the same for the 1970s?

23. Why do you suppose that U.S. GDP is so much higher today than 50 or 100 years ago?

24. Why do you think that GDP does not grow at a steady rate, but rather speeds up and slows down?

25. Cross country comparisons of GDP per capita typically use purchasing power parity equivalent exchange rates, which are a measure of the long run equilibrium value of an exchange rate. In fact, we used PPP equivalent exchange rates in this module. Why could using market exchange rates, which sometimes change dramatically in a short period of time, be misleading?

26. Why might per capita GDP be only an imperfect measure of a country’s standard of living?

27. How might you measure a “green” GDP?

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