GDP is an important measure of economic activity, telling us about production as well as employment and income. However, it is not a perfect measure.  What are two problems with using GDP to measure the standard of living?

Define GDP and its various components in details.

How should we calculate a value for the things that GDP does not currently measure?

Consider a simple economy that produces two goods: fries and burgers. The table shows the economy's production over several years. Calculate the real GDP for 2006 using 2004 as the base year. Year 2004 2005 2006 real GDP: Price of fries (in dollars) 6.00 8.00 9.00 Number of fries 4 4 5 Price of burgers (in dollars) 2.00 4.00 7.00 Number of burgers 3 5 8 dollars