ECO 111 Ch 5 part 2

Net Exports of Goods and Services Gross Domestic Product (GDP)

-568.1 14625.6

numbers

535 535 100 1230 615 200 990 440 225 Decrease decrease 12.5

Maria gets a new video camera made in the United States. Maria buys a new BMW, which was assembled in Germany. Kevin's employer upgrades all of its computer systems using U.S.-made parts. The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Kevin and Maria's house. Maria's father in Sweden orders a bottle of Vermont maple syrup from the producer's website

C Cm i g x

True or False: Gross domestic product (GDP) cannot be used to measure the economy's income

False

Sofaland, a Swedish furniture company, produces a table at a plant in Virginia on December 12, 2017. It sells the table to a college student on December 24. 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. (Note: Focus exclusively on whether production of the wood increases GDP directly, and ignore the effect of production of the new house on GDP.)

Included Excluded

Awake Cafe, a U.S. coffee company, produces a latte at its location in Minneapolis on January 18, 2017. It sells the latte to a customer immediately. Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 4, 2017. Athleticus imports the pair of sneakers into the United States on May 28, 2017. An accountant starts a client's 2017 tax return on April 14, 2018, finishing it just before midnight on April 15, 2018.

Included Excluded Excluded

Edison earns $300 per week working for Little Havana. Edison spends $150 to purchase software from PC Pros. Hilary spends $9 to order a mojito cocktail

MFP MGS MGS

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

Market value of final goods and services produced within the United States

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

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 mojito Hilary receives The $300 per week Edison earns working for Little Havana

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 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 quality of goods available to consumers 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 following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income when

firms and labor and capital

part 2

investment decreasing no overall change