Discussion Activity: The Efficiency of Markets

Introduction:

Gross domestic product (GDP) is the single most important indicator of macroeconomic performance. It gives us a snapshot of the overall health of the economy because it measures both output and income. These graphics illustrate the four pieces of GDP-consumption, investment, government spending, and net exports-and how these pieces changed from 1967 to 2011. On the bottom left, you can also see how real GDP has more than tripled since 1967.

Refer to the Snapshot infographic on page 194 in Chapter 6.

Discussion Questions:

1. What component of consumption do we spend a much greater percentage on now than in 1967?

2. Why do economists stress real GDP rather than nominal GDP when looking at GDP changes over time?