Economics Questions Thread

[Hodgeyhodgey]

To set this straight..
There are two questions. The first asked me to list the limitations of using GDP as a measure of economic activity (exclusion of black market activity, home duties, etc) which I have done. The second question, which I am having trouble with, says to 'give examples of the problems of using GDP as a measure of economic activity from your list above'. The part that's confusing me is what are examples of these 'limitations'? Is it just asking the same question, or am I to create scenarios where these limitations apply?

[schmalex]

Give examples of black market activity\home-based production, or situations when the TOT would mean that the GDP is giving a misleading impression of economic activity. So you're basically just elaborating I guess.

[Hutchoo]

What do you guys mean by TOT? I haven't used that term before.

[sam.utute]

Pretty sure they are referring to Terms of Trade.

[Water]

TOT = Terms Of Trade, it will be taught within the Economics Syllabus.

 But in summary, based on my understanding, its

the index for   Price of exports/ Price of imports    x 100.

Say your trading 100 dollars worth of apples to a particular country, and importing 100 dollars worth oranges. Suddenly the other country demands more apples, and is willing to pay at a higher price. Then your new value for that apple will rise to 102 dollars worth for the same volume of $100 apples.


The Previous TOT Index was $100/$100 x 100 = 100

The New Tot Index now is $102/$100 x 100 = 102

If your TOT increases above 100 > Then that means, your country's exports is at a greater value than the other country's as your exports are worth more for the same volume.

Vice Versa TOT < 100 means your country's exports is worth less for the same worth of imports that is being brought in.


I"m doing this at a micro sense. At a macro sense, with all the bazillion amount of exports and stuff, I don't know how it works unfortunately, I cannot comprehend, and the VCE Economics book is vague about it.

But so long you can apply the theory in a general sense, it should be fine! For year 12 that is!


TOT and Exchange Rates are two different things. Exchange Rates will affect the Volume. TOT will not.

[Hutchoo]

I think we use the same book for Economics, so what chapter is TOT mostly involved in?

Also, what is meant by RULCs?

[Water]

Hey Hutchoo, I use economic fundamentals in Australia, going to buy Economics Down Under as well. Some of the definitions in Economics Fundamentals , I don't particularly like.


Not sure which chapter TOT is mostly involved in.


RULC = Real Unit labour costs.

Labour Costs / Productivity  Adjusted for Inflation   


= Adjusted for Inflation (Real) Cost in labour to produce a unit of output.


If you need anymore info on it, just hit back on the forum.

[Hutchoo]

So... What does it mean by rising/falling RUCLs?

[Water]

If a firm pays you more money per hour.

Whats the benefits and disadvantages as a consumer or as a business.

[Hutchoo]

Sweet, thanks for that.

I was reading the chapter review for chapter 2 of economics down under and it says this:
"Per capita GDP, consumption or income are not good measures of living standards (especially non-material living standards) so other more informative measures have been devised like GPI and MAP."
What is GPI and MAP?

Thanks.

[chrisjb]

A quick question guys, is GDP a lagging, leading or coincidental indicator? I seem to remember being told that it was lagging, but wikipedia says it's coincidental  ???

[Water]

Lagging, because GDP is calculated every 3 months (quarter).


What is GPI and MAP? Should be in your book. But they are just indicators that involve the non material things/social costs. I reckon they are unreliable.

[Hutchoo]

Why is GDP regarded as a lagging indicator of economic activity? 

@Hutchoo

You can only calculate GDP based on past economic activity, on what has already occurred.

Since the calculation of GDP is the total annual production of goods and services per year, Calculated, per quarter.

By calculating per quarter <<< It makes it a lagging indicator, because we are calculating past events.

Whereas coincident indicators would be something like stock market, advertisement, etc etc.. Things happening now, that can reflect on economic activity levels

Haha, asked that question before Chrisjb; look at this post if you wanted a more in depth answer.
Anyone have any idea what is meant by GPI/MAP?

[sam.utute]

I can give you a brief summary.

"Genuine Progress Indicator (GPI)
This measure uses the same personal consumption data contributing to GDP, but it then makes both negative and positive adjustments to values to reflect the good or bad effects on society's welfare of some different types of activity and spending."

So basically, you take the GDP per capita figure and subtract negatives such as pollution, environmental damage, reduced leisure times etc.
Then we add positive things such as voluntary work, infrastructure etc.

So you end up with a figure that has taken into account things that effect non-material living standards, not just material living standards.

MAP = Measuring Australia's Progress
Has four categories that it looks at to assess our living standards:
1. Individuals - health, education etc.
2. The economy - GDP, housing
3. The environment - pollution, resources
4. Living together - crime, family indicators

For the exam, you will need to be able to describe one of the two, and also mention some of their weaknesses.

[Hutchoo]

Hi guys, I have another question.

For my SAC tomorrow; we should know demand side factors etc.
I have chosen ~5 demand side factors and I get confused between Aggregate wealth and disposable income.. they seem the exact same.