Economic Principles: Analysis of GDP, Micro/Macro, CPI, and Deflator

This document presents a student's responses to discussion prompts on core economic principles. The student addresses the limitations of GDP as a measurement tool, particularly its exclusion of the black market's contribution, and highlights the stark differences between microeconomic and macroeconomic perspectives. The discussion also covers inflation, the Consumer Price Index (CPI), and the GDP deflator, clarifying the distinction between nominal and real GDP. The student engages with peers' perspectives, offering both agreement and disagreement, and emphasizes the importance of considering both micro and macro viewpoints for a comprehensive understanding. Desklib provides this and other solved assignments to aid students in their studies.

ECONOMIC PRINCIPLES
RESPONSES
STUDENT ID:
[Pick the date]

Re: GDP as a measuring rod (Response to Ashley)
I agree with the assessment regarding GDP especially with regards to the fact that it leaves
out the contribution of black market. This is especially relevant considering the fact that with
regards to certain nations belonging to the developing and underdeveloped category, the
contribution of black market could be significant and thereby the underlying system of GDP
seems to favour the developed world where almost all the economy is formal in nature.
Having said that there is no denying that GDP is a useful technique for assessment of
economic development despite the shortfalls.
Re:Samuelson Article (Response to Dawn)
It is true that the difference between microeconomic and macroeconomic is quite stark. The
essential element is the level of interpretation of a given phenomenon. Microeconomic
involves viewing a situation or scenario from the perspective of an individual firm unlike
macroeconomic which involves viewing the situation from the industry perspective. Often
this would result in significantly different explanations and conclusions for a given
observation. However, it is imperative that microeconomics and macroeconomics are not
considered two separate watertight containers as understanding can be enhanced by taking a
collective view.
Re: Consumer Price Index and GDP Deflator (Response to Geoffrey)
I tend to disagree with Geoffrey on his perspective regarding inflation and simultaneously
price fall. It is imperative to note that inflation essentially is computed through the weighted
average price change in a defined basket of goods. Hence, it is possible that overall inflation
is rising but a particular good or component is getting cheaper. With regards, to nominal and
real GDP, the former represents the GDP computed at current price while the latter
represented the GDP computed at the base year prices. As a result, the latter is a more faithful
representation of economic growth.