The items included in the calculation of the
Answer to Problem 1KC
Option 'e' is correct.
Explanation of Solution
The Gross Domestic Product is the sum total of the money values of all the goods and services produced within the political boundary of an economy within a specific period of time which is usually one financial year. The money value of all the final goods and services that are produced within the economy will be summated in order to calculate the GDP.
Option (e):
The GDP calculation includes the monetary value of all the final goods and services produced within the economy in the financial year only. Since the value of the used car is already included in the GDP calculation of the year in which it was produced, it will not go for double entry. The Apple stocks are not considered as the services and are also not included. The homemaker's services are also not included in the GDP calculation and also the same idea of the used car is applied on the Gulf war military surplus sale which means none of the given is included in the GDP calculation and that means option 'e' is correct.
Option (a):
The current exchanges in the stocks and bonds, the government security and welfare payments etc are not included in the GDP calculations. This means that the purchase of 100 shares of Apple stock is a financial asset and not a newly produced good. This means that the transaction is not included in the GDP calculation and that makes option 'a' incorrect.
Option (b):
One product will be counted for only once in the GDP calculation and that means when there is a resale of the product, it will not be accounted for the GDP calculations. Thus, the value of the car will be included in the year in which it was produced and that means the resale will not be accounted for GDP and therefore, option 'b' is incorrect.
Option (c):
The Homemaker's services are not easily valued because they do more than the accountable work of the maid. They do such works without any remuneration and that means the work is an unpaid and nonmarket transaction which makes the inclusion of the homemaker's services not possible in the GDP calculation and thus are not included. This means that the option 'c' is also incorrect.
Option (d):
Since gulf war military surplus is not produced in the year and is already accounted for the year in which they were produced, just like the sale of the used car, it will not be included in the GDP calculation. Thus, option 'd' is incorrect.
Gross Domestic Product: The GDP is the sum total of the money value of all the final goods and services produced within the political boundary of a country within the financial year.
Want to see more full solutions like this?
Chapter P3 Solutions
Macroeconomics for Today (MindTap Course List)
- Use the figure below to answer the following question. Let là represent Income when healthy, let Is represent income when ill. Let E[I], represent expected income for a given probability (p) of falling ill. Utility & B естве IH S Point D represents ☑ actuarially fair & full contract actuarially fair & partial contract O actuarially unfair & full contract uninsurance incomearrow_forwardSuppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is the following: U = (Income). Riju is risk. She will prefer (given the same expected income). averse; no insurance to actuarially fair and full insurance lover; actuarially fair and full insurance to no insurance averse; actuarially fair and full insurance to no insurance neutral; he will be indifferent between actuarially fair and full insurance to no insurance lover; no insurance to actuarially fair and full insurancearrow_forward19. (20 points in total) Suppose that the market demand curve is p = 80 - 8Qd, where p is the price per unit and Qd is the number of units demanded per week, and the market supply curve is p = 5+7Qs, where Q5 is the quantity supplied per week. a. b. C. d. e. Calculate the equilibrium price and quantity for a competitive market in which there is no market failure. Draw a diagram that includes the demand and supply curves, the values of the vertical- axis intercepts, and the competitive equilibrium quantity and price. Label the curves, axes and areas. Calculate both the marginal willingness to pay and the total willingness to pay for the equilibrium quantity. Calculate both the marginal cost of the equilibrium quantity and variable cost of producing the equilibrium quantity. Calculate the total surplus. How is the value of total surplus related to your calculations in parts c and d?arrow_forward
- Sam's profit is maximized when he produces shirts. When he does this, the marginal cost of the last shirt he produces is , which is than the price Sam receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is , which is than the price Sam receives for each shirt he sells. Therefore, Sam's profit-maximizing quantity corresponds to the intersection of the curves. Because Sam is a price taker, this last condition can also be written as .arrow_forwardWhy must total spending be equal to total income in an economy? Total income plus total spending equals total output. The value-added measurement of GDP shows this is true. Every dollar that someone spends is a dollar of income for someone else. all of the abovearrow_forwardLabor Market Data Price $5 $10 $15 $20 $25 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000 Qd 15,000,000 12,000,000 9,000,000 6,000,000 3,000,000 Price $30 $25 $20 $15 $10 $5 + +- x- 3 6 Do + + F 9 12 15 Quantity (In millions) Area of a triangle = 1/2* base *height Market Efficiency & Total Surplus Worth Publishers SCENARIO: The state government is considering raising the minimum wage from $15 per hour to $20 per hour over the next 3 years. As an economic advisor to the governor, you have been asked to provide a recommendation on whether the minimum wage should be increased based on economic theory. Consider the labor market data provided. Prepare a brief report that: 1. Explains whether the labor market is currently efficient at the equilibrium wage of $15 per hour. How would you know? At equilibrium, what (dollar amount) is the Total Surplus this market provides? Show your rationale with numbers. 2. Analyzes the impact on total surplus in the market if the minimum wage is raised…arrow_forward
- Draw the IS-LM diagram at equilibrium and use it to show how one or both of the curves change based on the following exogenous changes. An increase in taxes. An increase in the money supply An increase in government purchasesarrow_forwardDon't use Ai. Answer in step by step with explanation.arrow_forwardcorospond to this message. Gross Domestic Product (GDP) represents the total value of all goods and services produced by a country. The news reporter shows excitement because rising GDP signifies positive economic performance. Consumer spending has increased while businesses expand and new job opportunities become available. If the GDP rises, your delivery business will likely handle more packages as consumer purchasing increases. The increase in business activity will lead to more opportunities for your company to generate higher profits. You may need to take action by hiring additional staff and purchasing extra delivery vehicles or finding ways to improve your operation speed and efficiency to meet increased demand.arrow_forward
Survey of Economics (MindTap Course List)EconomicsISBN:9781305260948Author:Irvin B. TuckerPublisher:Cengage Learning
