Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 7, Problem 7CQ
To determine
Determine the real earning of private nonagricultural production.
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Students have asked these similar questions
does a household purchase of a home built in 1985 affect GDP?
Which of the following transactions should or should not be counted in GDP?
Answer Yes or No and briefly explain your answer. Answers without explanation will not be considered
in grading, even if they are correct.
a. You buy a pair of new cowboy boots on a trip to Texas
b. You buy a pair of vintage cowboy boots from your cousin in El Paso
c. A cat burglar sells $10,000 of stolen jewelry to a fence
d. Amazon issues $1 billion worth of new shares
e. GM purchases $100 million worth of tires from Firestone
f. A private company builds a new road in Memphis Y
g. Stay-at-home parents provide an estimated $500 million of child care services
Are the following included in US GDP? Briefly explain your answer.
Used textbooks sold at your college bookstore
Use books sold at a garage sale
Cars made in the United States at a Toyota factory
Cars made in Germany at a General Motors factory
The price paid by an American tourist staying at a French hotel
The price paid by a German tourist staying at a New York hotel
Chapter 7 Solutions
Economics: Private and Public Choice
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- Which of the following are included in GDP calculations? a. Cleaning services performed by Molly Maid Corporation b. Lawn-mowing services performed by a neighborhood child c. Drugs sold illegally on a local street comer d. Prescription drugs manufactured in the United States and sold at a local pharmacy e. A rug woven by hand in Turkey f. Air pollution that diminishes the quality of the air you breathe g. Toxic-waste cleanup performed by a local company h. Car parts manufactured in the United States for a car assembled in Mexico i. A purchase of 1,000 shares of IBM stock j. Monthly Social Security payments received by a retireearrow_forwardWhat components of GDP (if any) would each of the following transactions affect? Explain. Uncle Tom buys a new refrigerator from a domestic manufacturer. Sidd buys a new house from a local builder. The Aladin family buys an old Victorian house from the Disney family. You pay a hairdresser for a haircut. Ford sells a Mustang from its inventory to the Cernogratz family. Ford manufactures a Focus and sells it to Avis, the car rental company. California hires workers to repave Highway 101. The federal government sends your grandfather a Social Security check. Honda expands its factory in Larkana.arrow_forward1) How do the following events influence Turkish GDP? Mothers living in Turkey take care of their pre-school child in their own home. You buy a new car from a dealer for 80,000 TL. You sell your father’s used car to a dealer for 70,000 TL. You sell your old car to a dealer for 60,000 TL. The dealer repaints it and sells it to a customer for 80,000 TL A Japanese company builds a factory in Düzce. (If this affects GDP, is it the Japanese or the Turkish GDP?) A German company buys stock in a Turkish company. An earthquake destroys many structures in Gebze industrial zone. The structures are not rebuilt this year. An earthquake destroys much of Gölcük and within a short time the town is rebuilt as it was before.arrow_forward
- Which of the following statements best describe how economists calculate GDP? Group of answer choices Economists at the Census bureau collect data from surveys sent to consumers, private firms and government agencies and add them up on a yearly basis. Economists at the Bureau of Economic Analysis pull together data on sales, imports, exports, government purchase and investments from various government sources every 3 months. Economists at the Bureau of Labor Statistics collect data from surveys sent to consumers, private firms and government agencies and add them up every 3 months. Economists at the Congressional Budget Office calculate GDP for a given year by adjusting the previous year’s GDP with inflation.arrow_forwardSuppose a group of British investors finances the construction of a plant to manufacture skateboards in St. Louis, Missouri. How will the construction of the plant affect GDP? Suppose the plant generates $100,000 in corporate profits this year. Will these profits contribute to GDP? Why or why not?arrow_forwardWhich of the following would NOT be included in GDP? US manufacturer making goods in EuropeFinal goods and servicesGoods and services produced during the current yearToyota manufacturing cars in Tennesseearrow_forward
- Tom is an organic gardener. For several years, he produced only for his own consumption. Last year, he sold his vegetables on Amazon directly to consumers. This year, he sold all of his vegetables to a company producing organic vegetable soup. When is the value of Tom’s vegetables included in GDP? Select one: a. None of his production is included in GDP, since it is considered home production. b. Only when he sells his vegetable on Amazon (BLS is able to see this transaction) c. When he sells his vegetables at the farmer's market and when he sells the vegetables to the organic soup company. d. Only when he sells his vegetables to the organic soup company.arrow_forwardWhich of the following transactions or activities would be counted in your country’s GDP? Explain your answers. A transportation company acquires a fleet of second-hand vehicles. The same transportation company acquires 1.000 gallons of gas from a foreign company deducted from the net export component of GDP. You buy 10 short-term government bonds. A mining company acquires new government licenses to drill in land the company already owns. You pay for a new haircut at your local hairdresser. Foreign residents buy a bundle of your country’s food specialties on an online retail site. Your parents spend a whole day cooking meals to be handed out to their poorer neighbors. The local government acquires furniture for newly built schools. Two telecommunications companies merge. A non-profit organization buys an apartment to lodge their headquarters.arrow_forwardFor 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…arrow_forward
- Indicate what components of GDP (if any) each of the following transactions would affect. Check all that apply. Transaction Consumption Investment Government Purchases Net Exports Your parents buy a bottle of French wine. Uncle John receives a check from the federal government for unemployment insurance benefits. Ford manufactures a Focus and sells it to Avis, the car rental company. Your parents pay an accountant to file their tax returns. Ford sells a Mustang from its inventory to the Martinez family. Aunt Jane buys a new house from a local builder. Aunt Polly buys a new air conditioner from a domestic manufacturer. Texas hires public middle school teachers.arrow_forwardSurvey of Economics: GDP Accounting Worksheet Place the transactions below in their appropriate categories in the GDP and calculate the overall effect on the GDP of the United States. My cost for auto repairs and inspection. ($1,000) The Moon township buys rock salt to maintain the municipality’s roads in the month of February ($2,000) An RMU student goes to study in Ireland for a total cost of ($5,000) A U.S. citizen buys a refrigerator from General Electric (A US company). ($1800) A US retailer buys a new cash register ($1500) The cost of auto parts used to repair my car ($300) My total gasoline bill for a year ($1,500) A Chinese citizen buys a U.S. government bond ($5,000) A Landscaping firm’s gasoline costs for a year ($2,500): A School district buys new uniforms for its basketball team ($1100) I invest in a fidelity mutual fund ($2,000) My total food cost for a year ($8,000) An American bank loans a German citizen ($5,000) An American buys a sewing machine to produce clothing…arrow_forwardWhich of the following are included in GDP and which are not? If an item is included, state which GDP category it falls under (consumption, investment, government, trade balance) a) the cost of having your appendix removed b) buying a new car from a dealership c) buying a used car from your neighbor d) the lettuce sold to the sub shop that will go on your sandwich e) babysitting services at a licensed daycare provider f) babysitting services provided by your cousin g) a 2-year increase in life expectancyarrow_forward
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