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Adjusting Economic Output for Natural Resource Depletion
Impact of Natural Resource Depletion on Indonesia's GDP and Growth Rate (1971-1984)
Comparison of GDP Accounting Flaws in Cod and Indonesian Forest Depletion
A direct parallel exists between the economic accounting of the Grand Banks cod fishery and Indonesian forestry. Both cases highlight a significant flaw in standard GDP calculations. The revenue generated from selling the natural resource—be it cod or timber—is included in GDP, but the corresponding loss from the depletion of the natural capital stock is not subtracted. This failure to account for the depreciation of natural assets results in an overestimation of the net economic benefit and masks the unsustainable nature of the activities.
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Introduction to Microeconomics Course
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Ch.1 Prosperity, inequality, and planetary limits - The Economy 2.0 Microeconomics @ CORE Econ
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Impact of Natural Resource Depletion on Indonesia's GDP and Growth Rate (1971-1984)
Comparison of GDP Accounting Flaws in Cod and Indonesian Forest Depletion
Evaluating National Economic Performance
The principle of adjusting a nation's economic output by subtracting the value of depleted natural resources, such as minerals and timber, is based on a logical parallel to which of the following standard economic adjustments?
A nation that experiences a boom in its timber industry by clear-cutting its old-growth forests will see a corresponding rise in its standard measure of total economic output. This rise accurately reflects a sustainable increase in the nation's economic well-being.
Rationale for Modifying Economic Output Measures
Critique of Unadjusted Economic Growth
To calculate a sustainable measure of national income, adjustments for the consumption of capital assets are necessary. Match each economic event with the category that best describes its impact on the nation's stock of capital.
A country reports a gross economic output of $1 trillion for a given year. During that year, the value of its machinery and buildings decreased by $80 billion due to wear and tear. In addition, the value of its extracted and sold non-renewable mineral reserves amounted to $50 billion. To calculate a more sustainable measure of the country's net output, a total of $______ billion, representing the consumption of both man-made and natural assets, must be subtracted from the gross figure.
To create a more accurate measure of a nation's sustainable economic performance, several adjustments must be made to the standard gross output figure. Arrange the following steps in the correct logical order to calculate this adjusted net output.
Country X reports a 7% annual increase in its total economic output, driven almost entirely by rapidly harvesting and selling its ancient forests. Country Y reports a 3% annual increase, with its economy based on services and manufacturing, while also investing heavily to maintain its existing factories and equipment. Considering the principle that a true measure of economic performance must account for the 'using up' of all productive assets, which statement best analyzes the situation?
Critique of a 'Growth-First' Economic Policy
Comparison of GDP Accounting Flaws in Cod and Indonesian Forest Depletion
A developing nation reported an average annual economic growth rate of 7.1% over a 13-year period. However, a revised analysis accounting for the depletion of its petroleum reserves, forests, and soil during that same period calculated an adjusted annual growth rate of only 4.0%. Based on these two figures, what is the most accurate conclusion?
Calculating Adjusted Economic Output
Advising on Sustainable Economic Measurement
Evaluating Economic Performance in a Resource-Rich Nation
Between 1971 and 1984, Indonesia's reported average annual GDP growth of 7.1% accurately represented the net increase in the nation's total wealth, which includes both manufactured capital and natural resource assets.
A study of a resource-rich country's economy from 1971 to 1984 produced several key figures. Match each figure or concept to its correct description regarding the measurement of national economic performance.
A resource-dependent nation's officially reported Gross Domestic Product (GDP) for a specific year was $90 billion. An economic analysis later determined that if the value of depleted petroleum reserves and soil erosion from that year were subtracted from the official GDP, the adjusted figure would have been 22% lower. Based on this information, the total value of the depleted natural resources for that year was $____ billion. (Enter a number only)
A country wants to calculate a measure of its economic output that accounts for the consumption of its natural assets. Arrange the following steps in the correct logical order to arrive at this adjusted figure.
Evaluating Policy Claims with Adjusted Economic Data
Explaining Adjusted Growth Metrics
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Evaluating National Economic Health
Analyzing National Economic Reporting
The island nation of Oakhaven reports a record-breaking year for its main economic indicator, driven entirely by a massive increase in the harvesting of its ancient, slow-growing hardwood forests. An economic analyst warns that this reported economic success is deceptive. Based on this scenario, what is the most significant flaw in the standard method used to calculate Oakhaven's economic performance?
Standard Gross Domestic Product (GDP) calculations accurately reflect a nation's sustainable economic well-being because they treat the depletion of natural capital (e.g., forests, fish stocks) the same way they treat the depreciation of man-made capital (e.g., machinery).
Critique of an Economic Indicator
A country's primary economic performance metric is based on the total market value of all final goods and services produced. Match each of the following economic activities with the most accurate assessment of how this standard metric would reflect the activity's true contribution to the nation's long-term economic well-being.
Evaluating Long-Term Economic Strategy
Analyzing Competing Economic Reports
A government is proposing a 10-year economic plan focused on rapidly extracting and selling its nation's large, non-renewable mineral deposits. The stated goal is to maximize the growth of the country's primary economic output metric to fund new infrastructure. Which of the following statements offers the most fundamental critique of this strategy from the perspective of long-term national wealth accounting?
The nation of Atlantica, whose economy is based on fishing, reports a 10% increase in national income after its fleets begin harvesting a newly discovered, large stock of deep-water fish. In the same year, the nation of Veridia, whose economy is based on forestry, reports a similar 10% income growth after clearing a significant portion of its ancient, previously untouched forests for timber. An economist claims that the methods used to calculate the national income for both nations share the same fundamental flaw. What is this shared flaw?