ECON 103 Ch. 6

PC Bell a company that sells computer systems directly to customers, buys computer chip for $99, software for $350, and a printer for $40. If the value added by Bell from selling this system (including printer and software) is $1,275, what is the price at which the system is sold?

$1, 764

During 2006 a leading auto manufacturer produced $20 million worth of mini-vans. However, due to soaring gas prices, the sale of mini-vans became sluggish and by the end of 2006 only $16 million worth of mini-vans were sold. As for the contribution of the mini-vans to GDP, choose one of the following: $20 million are added to 2006's GDP with $16 million as consumption and $4 million as private investment. $16 million are added to 2006's GDP, all as consumption. $20 million are added to 2006's GDP, all as consumption. $16 million are added to 2006'2 GDP, all as private investment.

$20 million are added to 2006's GDP with $16 million as consumption and $4 million as private investment.

Stock of capital on January 1, 2009: $11,500 billion Stock of capital on December 31, 2009: $12,250 billion From this one can conclude that in 2009, the level of net investment =

$750 billion

Per Capita GDP = (GDP in billions & population in millions)

(GDP/ Population) * 1,000 (of the same year)

GDP growth rate =

(New GDP - Initial GDP)/Initial GDP * 100

Population growth rate =

(New population - Initial population)/ Initial population * 100

During 2002, real GDP in Japan rose about 1.3%, but during the same period, retail sales fell 1.8 percent in real terms. How was this possible?

Because the sum total of real investment, government purchases, and net exports grew while consumption, which is measured by retail sales, fell in real terms.

Income Approach =

Depreciation + Profits + Compensation of Employees

Net Investment =

GDP Investment - Depreciation

Per Capita GDP growth rate =

GDP growth rate - population growth rate

Gross National Income of a country is

GNP converted into dollars using an average of exchange rates between the currency of the country and dollar over several adjusted for inflation

Ford Motor Co. produces a Focus automobile in its factory in Germany and sells it in India. This transaction is included

German GDP under exports

The relationship between net investment and GDP is given by,

Net Investment = GDP - consumption - government purchases - exports + imports - depreciation

GDP Investment =

Nonresidential Investment + Residential Investment + Change in Business Inventories

Final Sales =

Personal Consumption Expenditure + Residential Investment + Nonresidential Investment + Government Purchases

GDP =

Personal Consumption Expenditure + Residential Investment + Nonresidential Investment + Government Purchases + Changes in Business Inventories + Net Exports

Expenditure Approach =

Personal consumption + Gross private domestic investment + Government consumption and gross investment + Exports - Imports

Toyota, a Japan-based company manufactures a Camry automobile in Kentucky, USA and sells it in Japan. This transaction is included in

US GDP under exports

Imports are subtracted in the expenditure approach to calculating GDP, becasue

consumption, investment, and government spending are overstated as these include expenditures on both domestic and foreign goods

GDP calculated by the EXPENDITURE approach will be _________ the GDP calculated by the INCOME approach, becasue

equal to; the dollar value of the expenditure on new goods and services in a year must be equal to the dollar value of the income generated in that year

GDP is different from final sales since

final sales ignores changes in inventory, which are included in GDP calculation

Your college bookstore receives a shipment of new economics texts for $60,000. This transaction is

not included in GDP calculation, since books bought by the bookstore are intermediate goods

One reason why GDP is not a good measure of national well-being is that it fails to take into account

pollution