CPA - BEC 2
How is GDP calculated under the expenditure approach? ✔✔Under the expenditure approach,
GDP is calculated by summing total expenditures in the domestic economy. GDP is calculate as:
Add (GICE)
G - GOVERNMENT purchases of goods and services
I - Gross private domestic INVESTMENT
C - Personal CONSUMPTION expenditures
E - Net EXPORTS (exports minus imports)
How is GDP calculated under the income approach? ✔✔Under the income approach, GDP is
calculated by summing the value of resource costs and incomes generated during the
measurement period. GDP is calculated as:
(I PIRATED)
I - INCOME of proprietors
P - PROFITS of corporations
I - INTEREST (net)
R - RENTAL income
A - ADJUSTMENTS for net foreign income
T - TAXES ( indirect business taxes)
E - EMPLOYEE compensation (wages)
D - DEPRECIATED ( captial consumption allowance)
What are the causes of demand-pull inflation and cost-push inflation? ✔✔Demand-pull
inflation is caused by increases in aggregate demand. Thus, demand-pull inflation could be
caused by factors such as increases in government spending, decrease in taxes, increase in
wealth, increases in consumer confidence, and increase in money supply.
Cost push inflation - is caused by reductions in short-run aggregate supply. Thus, cost-push
inflation could be caused by factors such as an increase in oil prices and an increase in nominal
wages.
What is the difference between nominal GDP and real GDP? ✔✔Nominal GDP - measures that
value of all final goods and services produced within the borders of a nation in terms of current
dollars (i.e., the prices prevailing at the time of production).
Real GDP - measures the value of all final goods and services produced within the borders of a
nation in terms of constant prices (i.e., the value of goods and services adjusted for changes in
the price level). Specifically, Real GDP = Nominal GDP/GDP Deflator X 100
How is GDP calculated under the expenditure approach? ✔✔Under the expenditure approach,
GDP is calculated by summing total expenditures in the domestic economy. GDP is calculate as:
Add (GICE)
G - GOVERNMENT purchases of goods and services
I - Gross private domestic INVESTMENT
C - Personal CONSUMPTION expenditures
E - Net EXPORTS (exports minus imports)
How is GDP calculated under the income approach? ✔✔Under the income approach, GDP is
calculated by summing the value of resource costs and incomes generated during the
measurement period. GDP is calculated as:
(I PIRATED)
I - INCOME of proprietors
P - PROFITS of corporations
I - INTEREST (net)
R - RENTAL income
A - ADJUSTMENTS for net foreign income
T - TAXES ( indirect business taxes)
E - EMPLOYEE compensation (wages)
D - DEPRECIATED ( captial consumption allowance)
What are the causes of demand-pull inflation and cost-push inflation? ✔✔Demand-pull
inflation is caused by increases in aggregate demand. Thus, demand-pull inflation could be
caused by factors such as increases in government spending, decrease in taxes, increase in
wealth, increases in consumer confidence, and increase in money supply.
Cost push inflation - is caused by reductions in short-run aggregate supply. Thus, cost-push
inflation could be caused by factors such as an increase in oil prices and an increase in nominal
wages.
What is the difference between nominal GDP and real GDP? ✔✔Nominal GDP - measures that
value of all final goods and services produced within the borders of a nation in terms of current
dollars (i.e., the prices prevailing at the time of production).
Real GDP - measures the value of all final goods and services produced within the borders of a
nation in terms of constant prices (i.e., the value of goods and services adjusted for changes in
the price level). Specifically, Real GDP = Nominal GDP/GDP Deflator X 100
