Chapter 23 Post-Class Assignment Part II: Measuring a Nation's Income

The inflation rate in 2016 was ??? .

25%

Imports & Exports

A product's inclusion in one category does not necessarily imply that it is excluded from other categories. When a good is sent across national boundaries or when a service is provided by a company in one country for a company in another country, the value of that good or service is included in the exports category for the country in which the good or service originated and in the imports category for the country that receives the good or service

Fill in the missing cells in the table to calculate GDP using the expenditure approach. Consumption (C)= 10,215.7 Investment (I)= 1,737.3 Exports (X)= 1,844.4 Imports (M)= 2,356.1 Net Exports of Goods and Services= ??? Government Purchases (G)= 3,057.5 Gross Domestic Product (GDP)= ???

Consumption (C)= 10,215.7 Investment (I)= 1,737.3 Exports (X)= 1,844.4 Imports (M)= 2,356.1 Net Exports of Goods and Services= -511.7 Government Purchases (G)= 3,057.5 Gross Domestic Product (GDP)= 14,498.8

For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply.

Eleanor gets a new video camera made in the United States.= Consumption The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.= Government Purchases Darnell buys a bottle of Italian wine.= Consumption & Imports Eleanor's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. = Exports Darnell's employer upgrades all of its computer systems using U.S.-made parts.= Investment

Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.

Lucia spends $10 to have breakfast.= Market for Goods and Services Kenji spends $225 to purchase medical services from the Medical Clinic.= Market for Goods and Services Kenji earns $225 per week working for Dinah's Diner.= Kenji earns $225 per week working for Dinah's Diner.= Market for factors of Production

Fill in the missing cells in the table to calculate GDP using the expenditure approach.

Net Exports of Goods and Services= -338.8 Gross Domestic Product (GDP)= 1,973.6

Why is real GDP a more accurate measure of an economy's production than nominal GDP? Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP is not influenced by price changes, but nominal GDP is. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

Real GDP is not influenced by price changes, but nominal GDP is

Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply. The $225 per week Kenji earns working for Dinah's Diner Lucia's labor The $225 Kenji spends to purchase medical services from the Medical Clinic

The $225 per week Kenji earns working for Dinah's Diner Lucia's labor

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios is/are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The loss of enjoyment people incur when scenic land is converted to commercial use Expenditures on federal highways The leisure time enjoyed by households

The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The loss of enjoyment people incur when scenic land is converted to commercial use The leisure time enjoyed by households

True or False: Gross domestic product (GDP) measures total expenditures on final goods and services during a given period of time.

True

Based on this definition, indicate which of the following transactions will be included in (that is, directly increase) the GDP of the United States in 2017.

You chop down a cherry tree on your property in California and make a dining room table in 2017. A similar table sells for $800 in a local furniture store.= Excluded Treetopplers, a U.S. lumber company, produces wood at a plant in Oregon on September 19, 2017. It sells the wood to Buildit and Partners, a developer, for use in the production of a new house that will be built in the United States in 2017.= Excluded Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 17, 2017. Athleticus imports the pair of sneakers into the United States on May 21, 2017.= Ecluded Chocolate Express, a Swiss chocolate company, produces a chocolate bar at a plant in Illinois on December 12, 2017. An elementary school student buys the chocolate bar on December 24.= Included Awake Cafe, a U.S. coffee company, produces a latte at its location in Minneapolis on January 9, 2017. It sells the latte to a customer immediately.= Included

Government purchases

consist of any purchase by a state, local, or federal government. Therefore, when the state of Pennsylvania repaves highway PA 320, that is considered part of government purchases.

Consumption

consists of expenditures by individuals on goods and services, such as the new video camera made in the United States that Eleanor buys and the bottle of Italian wine that Darnell buys (see the imports explanation in this problem as well).

Investment

consists of spending on capital goods, household purchases of new housing, and (net) additions to inventories. Because computers are part of the capital stock of Darnell's company, upgrading those computers is considered investment spending.

Based on this model, households earn income when ?? purchase ??? in markets for factors of production.

firms & labor & capital

From 2015 to 2016, nominal GDP ??? , and real GDP ??? .

increased & decreased

When a U.S. company purchases and imports electronic parts from China to use to produce MP3 players within the United States, this purchase increases the ??? component of GDP while also ??? net exports by the same amount. Therefore, the purchase of electronic parts from China causes ??? in US GDP.

investment, decreasing. & no overall change

The gross domestic product (GDP) of the United States is defined as the ??? all ??? ???in a given period of time.

market value, final goods & services, & produced within the United States