Introduction to Measuring Economic Activity: GDP and the Three Approaches

The lecture introduces key concepts in measuring economic activity, focusing on GDP and its importance for analysis and forecasting. It covers the history of GDP, developed by Simon Kuznets, and explains the three methods of measuring GDP: output, income, and expenditure. The lecture also discusses the challenges in measuring GDP accurately, such as tax avoidance and black market activities. Finally, it concludes with a preview of future lectures that will delve deeper into these topics.

What are the three approaches used to measure economic activity?

• Supply, Demand, and Market

• Income, Expenditure, and Output

• Investment, Savings, and Growth

• Production, Consumption, and Trade

Why is measuring economic activity important for governments?

• To control inflation

• To evaluate policy decisions

• To increase taxes

• To reduce unemployment

Who was responsible for the first measure of economic activity via GDP?

• Milton Friedman

• Simon Kuznets

• Adam Smith

• John Maynard Keynes

What is the role of the United Nations in GDP measurement?

• To set global economic policies

• To maintain a standard for GDP measurement

• To provide financial aid

• To regulate international trade

What is the main reason for using values instead of quantities in measuring economic activity?

• To simplify calculations

• To account for diversity in production

• To reduce errors

• To increase accuracy

Which of the following is NOT a measure of GDP?

• Expenditure

• Income

• Output

• Trade

What is the significance of the circular flow of income in GDP measurement?

• It simplifies the calculation

• It measures inflation

• It highlights the flow of money

• It shows the balance of trade

What can cause discrepancies in GDP measurements?

• Accurate data collection

• Tax avoidance and black market activities

• Consistent economic policies

• Stable market conditions

How do black market activities affect GDP measurement?

• They stabilize GDP

• They are not accounted for

• They decrease GDP

• They increase GDP

What is a potential issue with using estimates in GDP measurement?

• They are not used in GDP measurement

• They are always inaccurate

• They can lead to significant errors

• They are not statistically significant