For each of the following scenarios, tell whether GDP would change and how each of the components of GDP would be affected. Honda expands its factory in Marysville, Ohio. You buy a bucket of fried chicken. Cousin Fred buys a newly built house. A family buys a new washing machine made this year in this country. Chrysler sells a Jeep from its inventory to an American household. California repaves Highway 101. An Italian household buys a bottle of California wine. In the Land of Milk and Honey, they produce two goods: Milk and Honey. In 2014, milk cost $2 a gallon and they produced 20 gallons. Honey cost $1 a pint and they produced 40 pints. In 2015, milk cost $2 a gallon and they produced 24 gallons. Honey cost $1 a pint and they produced 48 pints. In 2016, milk cost $2.50 a gallon and they produced 24 gallons. Honey cost $1.25 a pint and they produced 48 pints. The base year is 2015. During which time period did standard of living improve more? From 2014 to 2015 or From 2015 to 2016 Calculate real GDP in 2014. Calculate nominal GDP in 2015. Calculate the GDP deflator in 2016. Calculate the rate of inflation from 2015 to 2016. Express your answer as a percentage. --- Give a scenario in which nominal GDP increases but real GDP stays the same. Give a scenario in which real per capita GDP decreases but real GDP increases. Give a scenario in which real per capita GDP increases but quality of life decreases. Find a news story that does not mention GDP directly but describes a change to one of the components of GDP. In your homework, describe what happened and which component of GDP is affected.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

For each of the following scenarios, tell whether GDP would change and how each of the components of GDP would be affected.

Honda expands its factory in Marysville, Ohio.
You buy a bucket of fried chicken.
Cousin Fred buys a newly built house.
A family buys a new washing machine made this year in this country.
Chrysler sells a Jeep from its inventory to an American household.
California repaves Highway 101.
An Italian household buys a bottle of California wine.

In the Land of Milk and Honey, they produce two goods: Milk and Honey. In 2014, milk cost $2 a gallon and they produced 20 gallons. Honey cost $1 a pint and they produced 40 pints. In 2015, milk cost $2 a gallon and they produced 24 gallons. Honey cost $1 a pint and they produced 48 pints. In 2016, milk cost $2.50 a gallon and they produced 24 gallons. Honey cost $1.25 a pint and they produced 48 pints. The base year is 2015.

During which time period did standard of living improve more? From 2014 to 2015 or From 2015 to 2016
Calculate real GDP in 2014.
Calculate nominal GDP in 2015.
Calculate the GDP deflator in 2016.
Calculate the rate of inflation from 2015 to 2016. Express your answer as a percentage.

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Give a scenario in which nominal GDP increases but real GDP stays the same.
Give a scenario in which real per capita GDP decreases but real GDP increases.
Give a scenario in which real per capita GDP increases but quality of life decreases.
Find a news story that does not mention GDP directly but describes a change to one of the components of GDP. In your homework, describe what happened and which component of GDP is affected.

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