Identify whether the sale of the used book to college bookstore will affect the current year’s GDP .

Question

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Answer 1

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 GDP.

(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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Students have asked these similar questions

5. Some people find options expensive and use more complex structures to reduce the cost. For example, consider buying a call with a strike of $55 and selling a call with a strike of $60. a. What is the cost of establishing this combined position? b. What is the payoff of the combined position if the market price goes to $60? c. What is the payoff of the combined position if the market price goes to $100?

3. An investor has $1,000 to invest. They believe the price of the underlier will increase to $60 within one year. a. How many shares of stock could they buy with the $1,000 at the current price of $50, and how much would they make if the share price increased to $60? b. How many calls with a strike of $55 could they buy for the same $1,000, and how much would they make if the share price increased to $60? c. How much would they make (or lose) from the stock and from the calls if the share price declined to $40? 4. What is the premium on a call with a strike of $0.01? Why is the premium so close to the $50 share price?

1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.

Answer 2

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 GDP.

(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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Answer 3

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 GDP.

(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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Answer 4

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 GDP.

(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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Answer 5

Chapter 7, Problem 1CQ

(a)

To determine

Identify whether the sale of the used book to college bookstore will affect the current year’s GDP.

(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.

Answer 6

Chapter 7, Problem 1CQ

(a)

To determine

Identify whether the sale of the used book to college bookstore will affect the current year’s GDP.

(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.

Answer 7

Chapter 7, Problem 1CQ

(a)

To determine

Identify whether the sale of the used book to college bookstore will affect the current year’s GDP.

Answer 8

(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.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

(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.

Answer 13

(b)

To determine

Identify whether the settlement of bill will affect the current year’s GDP.

Answer 14

(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.

Answer 15

(b)

Expert Solution

Answer 16

(b)

Expert Solution

Answer 17

Expert Solution

Answer 18

(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.

Answer 19

(c)

To determine

Identify whether the lawn service provided by 16-year-old child affects the current year’s GDP.

Answer 20

(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.

Answer 21

(c)

Expert Solution

Answer 22

(c)

Expert Solution

Answer 23

Expert Solution

Answer 24

(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.

Answer 25

(d)

To determine

Identify whether the lawn services purchased from neighborhood affects the current year’s GDP.

Answer 26

(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.

Answer 27

(d)

Expert Solution

Answer 28

(d)

Expert Solution

Answer 29

Expert Solution

Answer 30

(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.

Answer 31

(e)

To determine

Identify whether the purchase of shares of stock and sales commission affects the current year’s GDP.

Answer 32

(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.

Answer 33

(e)

Expert Solution

Answer 34

(e)

Expert Solution

Answer 35

Expert Solution

Answer 36

(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.

Answer 37

(f)

To determine

Identify whether the discovery of natural gas affects the current year GDP.

Answer 38

(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.

Answer 39

(f)

Expert Solution

Answer 40

(f)

Expert Solution

Answer 41

Expert Solution

Answer 42

(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.

Answer 43

(g)

To determine

Identify whether the impact of natural disaster affects the current year GDP.

Answer 44

(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.

Answer 45

(g)

Expert Solution

Answer 46

(g)

Expert Solution

Answer 47

Expert Solution

Answer 48

(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.

Answer 49

(h)

To determine

Identify whether the income earned by the professor from abroad affects the current year GDP.

Answer 50

(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.

Answer 51

(h)

Expert Solution

Answer 52

(h)

Expert Solution

Answer 53

Expert Solution

Answer 54

Ch. 7 - Prob. 1CQ Ch. 7 - Prob. 2CQ Ch. 7 - Prob. 3CQ Ch. 7 - Prob. 4CQ Ch. 7 - Why might even real GDP be a misleading index of...Ch. 7 - Prob. 6CQ Ch. 7 - Prob. 7CQ Ch. 7 - Prob. 8CQ Ch. 7 - Prob. 9CQ Ch. 7 - Prob. 10CQ

Identify whether the sale of the used book to college bookstore will affect the current year’s GDP .

Identify whether the sale of the used book to college bookstore will affect the current year’s GDP.

Explanation of Solution

Identify whether the settlement of bill will affect the current year’s GDP.

Explanation of Solution

Identify whether the lawn service provided by 16-year-old child affects the current year’s GDP.

Explanation of Solution

Identify whether the lawn services purchased from neighborhood affects the current year’s GDP.

Explanation of Solution

Identify whether the purchase of shares of stock and sales commission affects the current year’s GDP.

Explanation of Solution

Identify whether the discovery of natural gas affects the current year GDP.

Explanation of Solution

Identify whether the impact of natural disaster affects the current year GDP.

Explanation of Solution

Identify whether the income earned by the professor from abroad affects the current year GDP.

Explanation of Solution

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Chapter 7 Solutions