1. NS3040 Fall Term 2016 GDP Issues
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. GDP Issues I
Diane Coyle, Beyond GDP, Foreign Affairs, February 16, 2014
Gross Domestic Product is a tally of all goods and services produced within a country during a specific time period.
Was not invented until the 1930s when Great Depression and WWII pushed Washington to start counting government spending as a net positive for economy
Number of conceptual problems in interpreting figures
Quality of products change over time
Need to net out inflationary effects
How to handle new products as they come into use
Many products not registered in market place thus not counted

3. GDP Issues II
Hard to make international comparisons given significant differences in economic structure around world
Other problems with GDP
Difficult to factor in environmental damage
Depreciation in oil countries
Sustainability
Products or services that improve living standards but are free – Google claims their free services are with $150 billion
Some have argued since GDP does not measure well-being we need a broader measure -- happiness
By failing to capture fully increasing range of products in the economy GDP under-reports innovation
Driverless Car – Goes down as a car, but for many more valuable. Higher contribution to safety which is not captured

4. GDP Issues III The trade part of GDP statistics also misleading
Just records final export import destination
US may trade more with Singapore than china in Singapore adds most of the value but final product exported from China
Does not capture shadow economy – may be 40% of output in some countries
Many attempts to augment GDP into a broader measure of welfare

5. Economist Better Life Index

6. Legathum Prosperity Index

7. Legatum Rankings 2016

8. Legatum Index 2016

9. GDP Introduction GDP Issues How is GDP measured?
Income generated
Value of output
Goods purchased
Controlling for inflation to obtain idea of how fast the real economy is growing
Problems of base year
Comparing the GDP of various countries
Which method gives the most accurate picture of relative size?
Problems in interpreting what GDP figures actually represent
Transformation?
Is more always better?

10. GDP Process

11. Index Number Problem

12. Controlling for Inflation I

13. Controlling for Inflation II

14. GDP Country Comparisons I

15. GDP Country Comparisons II