Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 7, Problem 1CQ
(a)
To determine
Identify whether the sale of the used book to college bookstore will affect the current year’s
(a)
Expert Solution
Explanation of Solution
The gross domestic product (GDP) measures the final value of the goods and services produced by a nation in a given period. Since the used textbook value will already be accounted for in last year GDP. Therefore, the resale of the used textbook into a college bookstore will not affect current year’s GDP and the GDP remains unchanged.
(b)
To determine
Identify whether the settlement of bill will affect the current year’s GDP.
(b)
Expert Solution
Explanation of Solution
Person S settles bill of $500 to doctor because of his service. Since the gross domestic product (GDP) will be accounted for the production of goods and services, hence, the event will affect the GDP and it will increase.
(c)
To determine
Identify whether the lawn service provided by 16-year-old child affects the current year’s GDP.
(c)
Expert Solution
Explanation of Solution
A 16-year-old child provides service to mowing his own family lawn, but it will not generate any revenue. Hence, the scenario will not affect current year’s GDP because the GDP will be accounted for the production of output and service, which generates revenue, hence, GDP remains unchanged.
(d)
To determine
Identify whether the lawn services purchased from neighborhood affects the current year’s GDP.
(d)
Expert Solution
Explanation of Solution
Person S purchases a service from a lawn-mowing businessman, hence, Person S paid wages for the service. Since the gross domestic product (GDP) will account for the production of output and service, which generates the revenue. Therefore, the scenario will affect the GDP and GDP will increase.
(e)
To determine
Identify whether the purchase of shares of stock and sales commission affects the current year’s GDP.
(e)
Expert Solution
Explanation of Solution
The shares of stock’s value will be accounted in previous year’s GDP, hence, the purchase of shares of shock will not affect the current year GDP, but the sales commission of $250 will affect the GDP and the GDP will increase.
(f)
To determine
Identify whether the discovery of natural gas affects the current year GDP.
(f)
Expert Solution
Explanation of Solution
A multibillion-dollar worth of natural gas discovered in Country O, which will not affect the current year GDP of Country U. Therefore, the GDP remains unchanged.
(g)
To determine
Identify whether the impact of natural disaster affects the current year GDP.
(g)
Expert Solution
Explanation of Solution
The natural disaster like hurricane causes damage in Country F, hence, it will affect the GDP of Country F. Therefore, the GDP will not change.
(h)
To determine
Identify whether the income earned by the professor from abroad affects the current year GDP.
(h)
Expert Solution
Explanation of Solution
The professor earned income from Country E. Since it does not specify that, the professor spends it in his native country. Therefore, it will not affect the GDP and GDP would not change.
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Chapter 7 Solutions
Economics: Private and Public Choice (MindTap Course List)
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