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5 marksNational Income Accounting

CAPE Economics Unit 2 · 2006 · Paper 2 · Question 1(d)

Explain why economists use real GDP rather than nominal GDP to measure economic well-being.

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Other parts of this question

  1. 1(a)Using the definition of GDP, explain why transfer payments such as social security benefits are excluded when computing the 'government purchases' component of…[4 marks]
  2. 1(b)State the formula for converting nominal GDP to real GDP.[1 mark]
  3. 1(c)(i)a)Using 2001 as the base year, compute the Nominal GDP for each year (2001, 2002, and 2003).[5 marks]
  4. 1(c)(i)b)Using 2001 as the base year, compute the Real GDP for each year (2001, 2002, and 2003).[5 marks]
  5. 1(c)(i)c)Using 2001 as the base year, compute the GDP deflator for each year (2001, 2002, and 2003).[5 marks]
  6. 1(c)(ii)a)Compute the percentage change in Nominal GDP from 2001 to 2002 and from 2002 to 2003.[5 marks]
  7. 1(c)(ii)b)Compute the percentage change in Real GDP from 2001 to 2002 and from 2002 to 2003.[5 marks]
  8. 1(c)(ii)c)Compute the percentage change in the GDP deflator from 2001 to 2002 and from 2002 to 2003.[5 marks]
  9. 1(e)(i)Compute Barry's contribution to Gross domestic product.[2 marks]
  10. 1(e)(ii)Compute Barry's contribution to Net national product.[2 marks]
  11. 1(e)(iii)Compute Barry's contribution to National income.[2 marks]
  12. 1(e)(iv)Compute Barry's contribution to Personal income.[2 marks]
  13. 1(e)(v)Compute Barry's contribution to Disposable personal income.[2 marks]

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