Econ exam 1

The following transactions are all included in gross domestic product EXCEPT:

Francis receives her social security check.

Choose the multiple choice answers which, when strung together, create an accurate definition of GDP. The U.S. Nominal Gross Domestic Product is:

-all final goods and services... -legally produced -within the territorial boundaries of the United States... -within a given time period - and valued at the prices at which the goods or services sold

In the context of inflation, which of the following best describes substitution bias?

Evaluating the price of a basket of goods over time doesn\'t account for changes that consumers make when the price of a particular good increases.

The market value of which of the following would be considered double counting in the calculation of GDP? Please sort into the appropriate box.

NOT included in the GDP because of double counting: wheels used to produce a skateboard that will be sold new a ticket for X Games bought from a person on the street corner Included in GDP: a new skateboard you bought for your niece the commission paid to the seller of a previously owned collectors skateboards

What is the difference between real and nominal gross domestic product (GDP)?

Nominal GDP for a given year is measured in dollars of that year, whereas real GDP is measured in dollars of some base year.

Label each description according to whether it is referring to nominal GDP or real GDP.

1. A measure of an economy\'s output using current prices. - Nominal GDP 2. A measure of an economy\'s output using constant prices. - Real GDP 3. A measure of output that is adjusted for inflation. - Real GDP 4. A measure of output that is not adjusted for inflation. - Nominal GDP

From the list below, select the correct definition of inflation.

A general and ongoing rise in the average level of prices in an economy.

Why is a hypothetical \"basket\" of goods used to measure inflation?

Consumers can see the general increase in price over time by using a basket of goods.

Households switching to an alternative good due to the price increase of a substitute which diminished the impact on their cost of living with a limited change in their quality of life.

commodity substitution bias

U.S. GDP

The Japanese car maker Honda owns production facilities in Marysville, Ohio. If the cars made there are sold exclusively in the United States, in which category would the cars be counted?

Please sort the items below into the appropriate box based on whether the change signals: 1) An increase in GDP and improved standard of living 2) An increase in GDP without improved standard of living, or 3) No increase in GDP and improved standard of living.

An increase in GDP and improved standard of living -improvements in production technologies -school quality increases from procurements of new equipment An increase in GDP without improved standard of living -household unpaid work becomes formalized in GDP -the black market shrinks because firms shift to the formal sector but production remains the same No increase in GDP and improved standard of living -workers work less but produce same amount -volunteers clean a river used to swimming -income inequality decreases and people dislike inequality - school quality increases from parental involvements

In the boxes below, please place the items into the bin it belongs to when calculating Gross Domestic Product (GDP). Either Consumption, Investment, Government, or Net Exports (or Trade Balance). If it is not included in GDP, leave it unplaced.

Consumption: ice cream, a domestically manufactured personal computer, cab fare for personal use, 55 cent tacos, A super bowl ticket bought new from the NFL Investments: A domestically manufactured business computer Government: A public school teacher Net Exports: An exported doll house

Given the following information about the economy of Pakistan, calculate Pakistan\'s GDP. Note that the currency of Pakistan is the Rupee. Assume that the values are all current and no conversions need to be made.

GDP = C+I+G+(X-M) Individual Consumption, C = 9.80 Government spending, G = 3.20 Pakistan Exports, X = 1.26 Pakistani Imports, M = 2.68 Investment, I = 1.20 GDP= 9.80+1.20+3.20+(2.68-1.26)=12.78

In what way does GDP not give an accurate representation of standard of living?

GDP does not account for how people distribute their time between work and leisure. GDP doesn\'t account for changes in environmental quality. GDP does not measure production that occurs outside of the market economy.

Classify the following goods according to whether or not they would be included in calculating the GDP for the United States. All goods should be placed. If a country is not specified, you can assume the action is performed in the United States.

Included in the GDP of the U.S.: Honda assembly and sale of cars in the U.S. Old Navy purchases mannequins to display clothes NOT included in the GDP of the U.S.: Sales of wheat to Mrs. Baird's Bakery Resale of used textbooks to college students GM's assembly and sale of cars in Mexico Ocean Spray purchases plastic to make bottles

Shown below is a table of the mortality rates, expressed as number of children per thousand live births that die yearly, for children in various countries along with the country\'s GDP (gross domestic product) per capita (a relative economic measure of the standard of living) in 2005.

The wealthiest countries have the lowest mortality rates, which may imply that they have the infrastructure or ability to treat the most likely causes of early child death.

Determine if each statement is True or False. Every statement belongs in a bin.

True: -When the quality of a product in the market basket, the price index will overstate the cost of living -The CPI measure changes in the cost of living rather than actual inflation False: -The purpose of indexing in a wage contracts is to keep real wages from rising due to inflation -the substitution bias causes the CPI to understate the cost of living -when the quality of a product in the market basket rises, the price index will understate the cost of living

New inventions increasing the variety of products available, which can increase the value of a dollar by presenting many quality substitute commodities.

introduction of new goods

The price of a high definition television remaining unchanged while its value increases due the introduction of new component parts, leading to higher screen resolution, lower power consumption, and easier adjustment of gain and bias.

unmeasured quality change