GDP

An analyst wants a measure of the total value of goods and services produced inside a country's borders during a quarter, regardless of who owns the producing firms. She should use:

1. A.The Consumer Price Index, which measures national output at prevailing market prices.Wrong. That index tracks the change in prices paid by consumers and measures no quantity of output at all.
2. B.Gross national product, which counts output by a country's residents wherever earned.Wrong. That measure follows ownership rather than location, so it includes output residents produce abroad.
3. C.The balance of payments, which records the country's economic transactions with the world.Wrong. That statement records cross-border flows of trade and capital rather than domestic production.
4. D.Gross domestic product, which counts output produced within the country's borders.Correct. Domestic product is defined by geography, capturing everything produced inside the borders.

Why: Gross domestic product is bounded by geography: everything produced inside the country counts, whoever owns the factory. Gross national product is bounded by ownership: everything produced by the country's residents counts, wherever the production occurs. In an economy hosting large foreign-owned operations the two figures can diverge noticeably. The price indexes answer a different question entirely, measuring how much prices moved rather than how much was produced.

An economy reports declining real gross domestic product for two consecutive quarters. This condition is commonly labeled:

1. A.A recessionCorrect — two consecutive quarters of declining real GDP is the conventional definition.
2. B.DeflationDeflation is a decline in the price level. This describes a decline in output.
3. C.A depressionA depression is a far longer and deeper contraction, commonly described as lasting several years.
4. D.StagflationStagflation requires high inflation alongside stagnation. Nothing here mentions prices.

Why: Two consecutive quarters of declining real GDP is the conventional working definition of a recession. A depression is a far longer and deeper contraction, commonly described as lasting several years.