In order to understand macroeconomics it is essential that students be able to measure the well-being of the aggregate economy and to grasp the implications of the statistics that are used for this purpose. Gross Domestic Product is the statistic that is used most frequently for analyzing the aggregate economy. Thus, it is important that students understand what GDP is and how it is calculated. This knowledge is essential to their understanding of the business cycle, the determination of the level of economic activity, and economic stabilization policies. As a result, GDP receives meaningful attention in this course.
I began to wonder, however, if my students were truly grasping the relevance of this statistic. Do they understand the significance of GDP? Are they able to analyze it? Do they view it in a holistic manner, or are they simply looking at it as the sum of the parts? I developed and administered a CAT specifically designed to provide answers to these questions.
In calculating Gross Domestic Product,
Who: (The U.S. Commerce Department)
Does What: (collects data on production and income in the U.S.)
For Whom: (economists, government, the public)
When: (quarterly)
Where: (calculation is done in Washington, D.C. but involves data
collected throughout the U.S.)
How: (by using the expenditures approach or the income approach)
(GDP = C + Ig + G + Xn)
Why: (to calculate the value of the total production of the U.S.
so that we have an idea of how well the economy is functioning)
This CAT was used immediately after the class discussion of GDP was concluded. (Sample answers which I hoped would be given by the student are shown above.)
The feedback I received from this CAT was genuinely enlightening. I expected my students to have some difficulty explaining how GDP is calculated, but I felt certain they would know why it is calculated since I had emphasized this point innumerable times, or at least I thought I had. Of course, the students' responses were just the opposite of what I had expected. Yes they knew the component parts of GDP and how to use them to calculate the statistic, but they were not totally sure why we bothered to calculate it or what significance it had in the overall study of economics. They had not grasped what to me was most important.
As a result of this CAT, I have changed the manner in which I present the GDP material. I continue to explain the method by which GDP is calculated because this knowledge is essential for the understanding of future material. However, I now not only state why GDP is significant, but I also bring in numerous articles from current publications that attest to and demonstrate the importance of GDP as an analytical tool.
For more information, contact:
Joyce Bremer
Assistant Professor of Economics
Oakton Community College
Des Plaines, Illinois
Fall 1996