Exhibit: Components of GDP for an Economy 1 Personal consumption expenditures Gross private domestic investment Net exports Imports Government purchases of goods and services Transfer Payments $480 billion. -$480 billion $120 billion Value (in billions) (S) -$120 billion 1,000 500 300 180 (Exhibit: Components of GDP for an Economy 1) What is the value of exports? 280 90
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- 31. What are three methods of calculating GDP. Do they end up with the same number? Please elaborate 32. What are intermediate goods? Why do economists exclude the value of intermediate goods while calculating national income? 33. Compare and contrast the U.S. economic record prior to 1940 and after 1950. How do the two time periods differ? What best explains the differences according to a macroeconomist? 34. Why do price levels increase when government adopts fiscal or monetary policy to correct the economy when it faces a recession and high unemployment? 35. Are there key differences between an increase in the capital stock and an improvement in the level of technology? 36. Describe how the labor force, the nation's capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity. 37. High unemployment is socially wasteful. Why?6. Limitations of GDP Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. Expenditures on federal highways The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The quality of goods available to consumers The loss of enjoyment people incur when scenic land is converted to commercial use When a U.S. company purchases and imports wood from Brazil to use to build new houses within the United States, this purchase increases the component of GDP while also net exports by the same amount. Therefore, the purchase of wood from Brazil causes in US GDP.3. In a small community, breakfast is the most important meal of the day. Therefore, the only two goods that this community produces are coffee and scones in the following amounts: Year 2020 2021 Quantity 60 cups 90 cups Coffee Price $1.25 $1.45 Quantity 45 units 65 units Scones Price $2.10 $3.95 a) Calculate the inflation rate for 2021 using the GDP deflator method (assume that 2020 is the base year for real GDP calculations). Show your work. b) Calculate the inflation rate for 2021 using the CPI method (assume that 2020 is the base year for CPI calculations). Additionally, assume that the consumption basket for both years contains only 10 cups of coffee and 40 scones. Show your work. c) Compare the results of both inflation calculations and explain why they are similar or different based on the two methods and on the specific data used in this example.
- Question 7 The expenditures approach to GDP equals a) Consumption + Gross Investment + Government Purchases + Net Exports. b) Employee Compensation + Profit + Net Property Income + Indirect Business Taxes + Depreciation - Income Earned Abroad. c) Consumption + Net Investment (Gross Investment-Depreciation) + Government Purchases + Net Exports. d) Employee Compensation - Profit - Net Property Income - Indirect Business Taxes-Depreciation - Income Earned Abroad.29.The income approach to measuring GDP: A) B) c) focuses on how income is earned, not spent. uses the factors payments made by households to businesses to estimate GDP. uses household expenditures to back out national income and GDP. D) uses of the factor payments made by household to government 30. National income is a sum of: a) spending of four sectors of the economy on GDP. b) payments to the factors of production. c) factors payments made by household to government d) factors payments made by business to government.Table 1: Items for GDP Calculation Item Billions of Dollars 250 Government expenditure on goods and services Compensation of employees 1,675 325 Gross private domestic investment Rental income 20 1425 Personal consumption expenditures Net interest 40 Net exports of goods and services 100 Indirect business taxes and depreciation 300 1. The table 1 above shows some (but not all) national income accounting data for a hypothetical country. According to these data, the value of GDP is billion. a) £2100 b) £2050 c) £1850 d) £2000 2. When a worker quits a job to look for a better job, a) frictional unemployment increases. b) structural unemployment decreases. c) structural and cyclical unemployment increase. cyclical unemployment increases. d) Student ID number: X W 0 Labor (billions of hours per year) 3. Based on the above figure, the country of Kemper is on its aggregate production function at point W. The government of Kemper passes a law that makes 4 years of college mandatory for all…
- 6. Limitations of GDP Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. The costs of overfishing and other overly intensive uses of resources O Federal government paychecks to soldiers The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The leisure time enjoyed by households When a U.S. company purchases and imports wood from Brazil to use to build new houses within the United States, this purchase increases the component of GDP while also net exports by the same amount. Therefore, the purchase of wood in US GDP. from Brazil causes3. Limitations of GDP Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. The quality of goods available to consumers The loss of enjoyment people incur when scenic land is converted to commercial use The value produced when you wash your own car at home O Federal government paychecks to soldiers When a U.S. company purchases and imports electronic parts from China to use to produce smartphones within the United States, this purchase increases the component of GDP while also net exports by the same amount. Therefore, the purchase of electronic parts from China causes in US GDP.5. Problems and Applications Q9 A farmer grows wheat and sells to a miller for $90. The miller turns the wheat into flour and sells the flour to a baker for $145. The baker turns the wheat into bread and sells the bread to consumers for $155. Consumers eat the bread. Assume that these transactions account for all economic activity in this economy. GDP in this economy is S Value added is defined as the value of a producer's output minus the value of the intermediate goods that the producer buys to make the output. Assuming there are no intermediate goods beyond those just described, complete the following table by calculating the value added for each of the three producers. Then enter the total value added in the final row. Producer Farmer Miller Baker Total Value Added True or False: The total value added for the three producers in this economy equals the economy's GDP. True (Dollars) False
- 2. Limitations of GDP Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. The components of an MP3 player that are produced in China The value produced by doing your own laundry Funds spent by city governments to renovate their buildings The costs of overfishing and other overly intensive uses of resources The leisure time enjoyed by Americans5. Problems and Applications Q9 A farmer grows wheat, which she sells to a miller for $70. The miller turns the wheat into flour, which she sells to a baker for $120. The baker turns the wheat into bread, which she sells to consumers for $135. Consumers eat the bread. Assume that these transactions account for all economic activity in this economy. GDP in this economy is $ Value added is defined as the value of a producer's output minus the value of the intermediate goods that the producer buys to make the output. Assuming there are no intermediate goods beyond those just described, complete the following table by calculating the value added for each of the three producers. Then enter the total value added in the final row. Value Added Producer (Dollars) Farmer Miller Baker Total True or False: The total value added for the three producers in this economy does not equal the economy's GDP.1-While calculating GDP, goods and services that are produced and sold illegally and items that are produced and consumed at home are not included because __________ Select one: a. government wants to discourage these production and consumption b. it does not contribute much value to GDP c. these goods and services does not pay taxes d. measuring them is so difficult Clear my choice 2- Country A has a population of 1,000, of whom 700 worked an average of 8 hours a day and had a productivity of 2.5. Country B has a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. The country with the higher real GDP is country B. Select one: a. True b. False Clear my choice
