a)
The question requires us to determine the transactions which are included in the country U’s
a)
Explanation of Solution
Yes, the structure of the new bottling plant in country U will be included in the GDP because the construction of new plants is an example of the final product, and it is considered investment spending in the estimation of GDP.
GDP is the measurement of all final goods and services produced in an economy in a financial year. The calculation of GDP includes domestically produced final goods and services such as capital goods, change in inventory, and newly constructed structures in financial years. It doesn’t include intermediate goods and services (to avoid the double entry problem), used goods, stocks and bonds, foreign-produced goods and services, and other items.
b)
The question requires us to determine the transactions which are included in the country U’s GDP, and which are not included in the country U’s GDP.
b)
Explanation of Solution
No, sales of existing or used airplanes will not be included in the GDP of the country U because GDP estimation doesn’t include used items.
c)
The question requires us to determine the transactions which are included in the country U’s GDP, and which are not included in the country U’s GDP.
c)
Explanation of Solution
No, purchasing an existing share represents the transfer of ownership, not any production. So, it will not be included in the GDP of the country U.
d)
The question requires us to determine the transactions which are included in the country U’s GDP, and which are not included in the country U’s GDP.
d)
Explanation of Solution
The
Net export = Export (X) − Import (IM)
GDP = C + I + G + X − IM
Yes, selling domestically produced goods in a foreign nation represents the exports of the bottle of Chardonnay. Thus, it will be included in the GDP of the country U.
e)
The question requires us to determine the transactions which are included in the country U’s GDP, and which are not included in the country U’s GDP.
e)
Explanation of Solution
The national income (GDP) is the sum of consumption spending (C), investment spending (I), government expenditure (G), and net exports.
Net export = Export (X) − Import (IM)
GDP = C + I + G + X − IM
No, purchasing French perfume represents the import. Thus, it will not be included in the GDP of the country U.
The GDP estimation doesn’t include imports.
f)
The question requires us to determine the transactions which are included in the country U’s GDP, and which are not included in the country U’s GDP.
f)
Explanation of Solution
The national income (GDP) is the sum of consumption spending (C), investment spending (I), government expenditure (G), and net exports.
Net export = Export (X) − Import (IM)
GDP = C + I + G + X − IM
Yes, the addition of surplus books to its inventories is part of the investment. Thus, it will be included in the GDP of the country U.
Chapter 10 Solutions
Krugman's Economics For The Ap® Course
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- Dummy variables News reports claim that in the last year television watching has increased. You believe that rising unemployment during Covid may be one of the causes for this. Suppose you are interested in looking at the effect of being unemployed on the hours spent watching Netflix per day. You collect data on 10,000 people from Chicago who are between the age of 20 and 60. You define the dummy variable Unemployed which takes the value 1 for those who are unemployed and 0 for those who are employed. Equation 1: Hours spent watching Netflix₁ = ßo + B₁Unemployed; + ε¿ Following is the output for equation 1: reg hours spent_watching_netflix unemployed Source SS df MS Number of obs 10,000 F(1, 9998) = 14314.03 Model Residual 3539.70065 2472.39364 9,998 1 3539.70065 .247288822 Prob F R-squared == 0.0000 = 0.5888 Total 6012.09429 9,999 . 601269556 Adj R-squared Root MSE = 0.5887 .49728 hours spen~x Coef. Std. Err. t P>|t| [95% Conf. Interval] unemployed cons 1.189908 .0099456 119.64…arrow_forwardDummy variables News reports claim that in the last year television watching has increased. You believe that rising unemployment during Covid may be one of the causes for this. Suppose you are interested in looking at the effect of being unemployed on the hours spent watching Netflix per day. You collect data on 10,000 people from Chicago who are between the age of 20 and 60. You define the dummy variable Unemployed which takes the value 1 for those who are unemployed and 0 for those who are employed. Equation 1: Hours spent watching Netflix₁ = ßo + B₁Unemployed; + ε¿ Following is the output for equation 1: reg hours spent_watching_netflix unemployed Source SS df MS Number of obs 10,000 F(1, 9998) = 14314.03 Model Residual 3539.70065 2472.39364 9,998 1 3539.70065 .247288822 Prob F R-squared == 0.0000 = 0.5888 Total 6012.09429 9,999 . 601269556 Adj R-squared Root MSE = 0.5887 .49728 hours spen~x Coef. Std. Err. t P>|t| [95% Conf. Interval] unemployed cons 1.189908 .0099456 119.64…arrow_forward17. The South African government's distributive stance is clear given its prioritisation of social spending, which includes grants and subsidised goods. Discuss the advantages and disadvantages of an in-kind subsidy versus a cash grant. Use a graphical illustration to support your arguments. [15] 18. Redistributive expenditure can take the form of direct cash transfers (grants) and/or in-kind subsidies. With references to the graphs below, discuss the merits of these two transfer types in the presence and absence of a positive externality. [14] 19. Expenditure on education and healthcare have, by far, the biggest redistributive effect in South Africa' by one estimate dropping the Gini-coefficient by 10 percentage points. Discuss the South African government's performance in health and education provision by evaluating both the outputs and outcomes in these areas of service delivery. [15] 20. Define the following concepts and provide an example in each case: tax rate structure, general…arrow_forward
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