(a) REAL GDP VS NOMINAL GDP
Some years ago, the movie Avatar overtook Titanic as the highest grossing movie of all time. An article published by Forbes.com at that time noted that “the average ticket price in 2008 (Avatar was released in 2009) was US$7.18, up 56% from the price in 1997 when Titanic was in theatres”. The article says that a look at domestic grossed (box office receipts) adjusted for inflation shows a more realistic view of Avatar’s performance.
- Why would adjusting for inflation show more realistic view of Avatar’s performance at the box office?
- Which would be the appropriate measure of how well a movie performed at the box office: the dollar value of tickets or the number of tickets sold? Hy don’t the newspapers report the number of tickets sold rather than the dollar value of tickets sold?
- Would comparing the total number of tickets sold by all movies in 1939 with the total number of movies sold in 2015be a good way to measure how the relative importance of the movies in the economy has changed overtime? Briefly explain.
(b) Does GDP measure what we want to measure?
- Why does the size of the country’s GDP matter? How does it affect the quality of life of the country’s people?
- Why is GDP an imperfect measure of economic wellbeing?