ECON 200 Exam 4 Homework

GDP excludes

-activities that occur outside formal markets. -goods and services traded through barter. -goods and services that are not bought and sold in a market.

The table below shows hypothetical values of the expenditure components for the United States in 2016. Expenditures in the United States Expenditure Component Amount of Expenditure Durable Goods $1,352.5 Non-Durable Goods $2,789.2 Services $8,304.5 Gross Investment $2,824.7 Exports $2,473.3 Imports $2,940.7 Federal Government $1,326.7 State & Local Government $2,070.4 Using the values in the table, calculate the following aggregate expenditures and nominal GDP. Calculate consumption expenditures in 2016. $____________________ billion

12,446.2 (Consumption = Durable Goods + Non-durable Goods + Services)

_______________ is the largest component of GDP in the United States.

Consumption

The GDP _________ __________ can be used to track prices from year to year.

Price Index

Nominal gross domestic product is the

dollar value of all final goods and services that are produced during a fixed period of time.

By dividing ______________ GDP by ___________ GDP, we allow the quantities to cancel out, leaving a ratio of prices between the two years.

nominal; real

The Consumer Price Index is used to measure

the overall cost of the goods and services bought by a typical consumer. & Inflation

Indicate which of the following is (are) not included directly in the calculation of GDP. -Used Goods -Government Spending on Goods -Intermediate Goods -Final Services -Final Goods

-Used Goods -Intermediate Goods

GDP is not a perfect way to measure economic activity because

-goods and services that are not bought and sold in a market are not included in GDP. -it does not account for changes in product quality. -it ignores activities that occur outside formal markets.

Suppose an economy start the year with $200 million in capital, and during the course of a year it adds $42 million of gross investment. Economists estimate that the depreciation rate for this economy is 8% per year. Calculate depreciation and net investment for this economy. Depreciation: $___________ million Net Investment: $___________ million

16: (200*8%) 26: (42 - 16)

Increased imports means greater competition from abroad which

benefits consumers in the form of lower prices.

GDP cannot account for

intangibles, such as happiness.

The table below shows hypothetical values of the expenditure components for the United States in 2016. Expenditures in the United States Expenditure Component Amount of Expenditure Durable Goods $1,352.5 Non-Durable Goods $2,789.2 Services $8,304.5 Gross Investment $2,824.7 Exports $2,473.3 Imports $2,940.7 Federal Government $1,326.7 State & Local Government $2,070.4 Using the values in the table, calculate the following aggregate expenditures and nominal GDP. Calculate the amount fo net exports in 2016. $______________ billion

-467.4 (Net Exports = Exports - Imports)

The table below shows nominal GDP, exports, and imports for the United States. Nominal GDP, Exports, and Imports Year Nominal GDP Exports Imports 2015 $17,172.7 $2,344.0 $2,815.4 2016 $17,806.7 $2,372.7 $2,924.8 Calculate the value of net exports in 2015. $_______________ billion

-471.4 *NX = X - M; Net Exports (NX) = Exports (X) - Imports (M)

The table below shows nominal GDP, exports, and imports for the United States. Nominal GDP, Exports, and Imports Year Nominal GDP Exports Imports 2015 $17,172.7 $2,344.0 $2,815.4 2016 $17,806.7 $2,372.7 $2,924.8 Calculate the value of net exports in 2016. $________________ billion

-552.1 *NX = X - M; Net Exports (NX) = Exports (X) - Imports (M)

The following table shows prices and quantities in the hypothetical economy of Lowlands for two different items in two different years. Assume these are the only items produced in this economy. What is the value of nominal GDP for Lowlands in Year 1? $___________

1,825 ($1.25*500 = $625; $12.00*100 = $1,200; $625 +$1,200 = $1,825)

The table below shows hypothetical values of the expenditure components for the United States in 2016. Expenditures in the United States Expenditure Component Amount of Expenditure Durable Goods $1,352.5 Non-Durable Goods $2,789.2 Services $8,304.5 Gross Investment $2,824.7 Exports $2,473.3 Imports $2,940.7 Federal Government $1,326.7 State & Local Government $2,070.4 Using the values in the table, calculate the following aggregate expenditures and nominal GDP. Calculate nominal GDP in 2016. $_______________ billion

18,200.6 *Nominal GDP = Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX)

Assume Year 1 is used as the base year for this economy. What is the value of real GDP in Year 2? $____________

2,140 ($1.25*560 = $700; $12.00*120 = $1,440; $700 + $1,440 = $2,140)

What is the value of nominal GDP for Lowlands in Year 2? $____________

2,520 ($1.50*560 =$840; $14.00*120 = $1,680; $840 + $1,680 = $2,520)

Suppose an economy start the year with $200 million in capital, and during the course of a year it adds $42 million of gross investment. Economists estimate that the depreciation rate for this economy is 8% per year. Calculate the amount of next year's beginning capital stock for this economy. $____________________ million

226: (200 + 26)

The table below shows the values of several components of GDP. Composition of Gross Domestic Product Component Value Consumer durables $1,316.9 Consumer nondurables $2,637.8 Services $8,087.8 Business fixed investment $2,835.0 Residential fixed investment $571.5 Inventories $89.0 Exports $2,341.7 Imports $2,888.7 Government purchases $3,157.4 (in billions) What is the value of total gross investment?

3,495.5 Total Gross Investment = 2,835.0 + 571.5 + 89.0 Business Fixed Investment + Residential Fixed Investment + Inventories

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, four cranes wear out. At the same time, we invest in capital and purchase six new cranes. Gross investment is equal to ________ cranes, and depreciation is equal to ________ cranes.

6; 4 Gross Investment = 6 Depreciation = 4

Although GDP is likely the best measure of economic activity in the economy, one reason why GDP is considered to be an imperfect measure is because

GDP does not include the purchase of illegal goods.

GDP stands for

Gross Domestic Product.

In Lowlands, if nominal GDP were used instead of real GDP, the value of output in Year 2 would be _________________.

Overstated

The following table shows the hypothetical values for the real GDP and population for the United States, Japan, Brazil, and Germany in 2016. Complete the table by calculating the real GDP per capita for each country.

United States: $48,145 Japan: $34,972 Brazil: $8,988 Germany: $38,028

Which of the following statements about economic growth is accurate? a. The world's sustained economic growth has only been occurring over the last 300 to 400 years b. Countries in Africa and South America are responsible for most of the economic growth in the world since the 1600s. c. Sustained economic growth has been occurring since the start of the Roman Empire. d. Economic growth has been shared equally among all the countries in the world since the start of the most recent generation.

a. The world's sustained economic growth has only been occurring over the last 300 to 400 years