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GDP Up! or Down?

Great article this week, The World’s Economy Soared Last Year (or Plunged), on the relative value of currency, perfect for Chapter 2’s coverage of CPI and inflation.  When they measure the world GDP in dollars it went down from 2014 to 2015:

GDP_World_USD

In the article they say that the 5% drop seen in the graphic turns into a 13.6% gain if you measure world GDP in euros!  The caption includes the statement, “output fell because the dollar rose”, which is very difficult for my students to wrap their heads around.  I included a currency conversion chart on the quiz so they could do the math for themselves:

EUR_USD

For many of my students this chart just added to the confusion, especially given that the title states USD per 1 EUR, but then underneath that it seems to contradict this with EUR/USD.  I am not sure why they put in the EUR/USD, maybe it is just a general indication of the 2 currencies involved.  In any case, we can use the chart giving USD per 1 EUR to complete the quiz and see how the 5% drop turns into a gain.  Try it and see :O)

Q3 GDP_IMF_PPP

  1. The article, The World’s Economy Soared Last Year (or Plunged), is all about the relative value of currency.
    1. They say that global GDP declined from $77.3 trillion to $73.5 trillion as indicated in the 1st graphic above. Compute the ratio of the 2105 world GDP to 2014 world GDP and scale the second quantity to 1.  How is this ratio related to their stated 5% decline?
    2. The 1st graphic above says the “output fell because the dollar rose”. How does the 2nd graphic show the dollar “rising”?
    3. Use the 2nd graphic to convert the $77.3 trillion in 2014 into EUR, and the $73.5 trillion into 2015 EUR. Use the conversion rate at the start of each year.
    4. Now calculate the percentage change from 2014 to 2015 using the EUR values you just computed from part c.
    5. Lots of acronyms in this one! What does GDP, PPP, and IMF stand for?
  1. In DLS Joel Best discusses organizational practices and how choices must be made that affect the statistics computed.
    1. Give 1 specific example of such a choice and the statistic that would be affected.
  2. Joel Best discusses how big numbers confuse people.
    1. Compute how long 1 thousand seconds is in minutes.
    2. Compute how long 1 million seconds is in days.
    3. Compute how long 1 billion seconds is in years.
    4. Compute how long 1 trillion seconds is in years.
    5. Complete the following analogy: A penny is to $10,000 as _________ is to $1 trillion. The value you just put in the blank is like a penny to the U.S. government’s budget.

 

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