ECON 202 Ch 7 Homework

Based on the table below, calculate nominal GDP, real GDP, the GDP deflator, and the inflation rate in each year and fill in the missing parts of the table. Use 2016 as the base year.

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Using the expenditure approach to calculate current GDP, select the proper classification for each of the following transactions: a. Nissan produces a car at its Tennessee plant in December, but does not intend to sell it until after the end of the year. b. An auto parts maker buys an idle textile plant in North Carolina with the intent of converting it to a distribution center. c. The U.S. Army rents a warehouse to store surplus equipment. d. Boeing buys some new machinery for its assembly plant in South Carolina. e. A state employees' pension fund in California buys $10 million in corporate bonds. f. A local bakery buys 500 pounds of flour to make bread. g. A doctor buys a painting to hang in his office waiting area from an artist on Etsy. h. A family rents a beach house for a week's vacation. i. A retiree in Chicago receives a Social Security check from the U.S. Treasury.

A) Inventory Investment (I) B) Residential Investment (I) C) Not Counted D) Business Investment (I) E) Not Counted F) Investment (I) G) Consumption (C) H) Consumption (C) I) Not Counted

Given the following information about each economy, either calculate the missing variable or determine that it cannot be calculated: a. Suppose C = $20.4 billion, I = $3.6 billion, G = $5.2 billion, and NX = $-1 billion. Total income is b. Suppose total income is $0.9 trillion, G = $0.2 trillion, and C = $0.4 trillion. I is c. Suppose total expenditure is $676 billion, C = $435 billion, I = $110 billion, and G = $80 billion. NX is: $ billion. Exports

27.2 inter determinante -60 inter determinante

Imagine that the United States produces only three goods: apples, bananas, and carrots. The quantities produced and the prices of the three goods are listed below: a. U.S. GDP is: $ . b. Suppose that a drought hits the state of Washington. This drought causes the quantity of apples produced to fall to 6. Assuming that all prices remain constant, the new U.S. GDP is: $ . c. Assume, once again, that the quantities produced and the prices of the three goods are as listed in the table. Now, given this situation, carrot sellers decide that the price of carrots is too low, so they agree to raise the price. If the U.S. GDP is $80.00, the new price of carrots is: $ per carrot.

70 64 2

Suppose car companies produce a lot of cars this year but decide to hold the new models back in warehouses until next year, so the new cars can be released in a new-model year. This year's GDP will be: The choice to reserve the cars for a year:

the same whether or not the cars are sold right away. then the production is counted as investment.

Suppose that the GDP deflator grew by 10 percent from last year to this year. That is, the inflation rate this year was 10 percent. This means that overall: This inflation rate implies that the growth rate in real GDP was 10 percent:

prices in the economy have risen by 10 percent. 10 percent less than the growth rate in nominal GDP.

George owns a house on a 10-acre lot filled with peach trees. Each year he hires a few workers to pick the peaches, then he sells them to Patty's Pies for $5,000. Patty uses the peaches to make pies that she sells for $8,000 to local restaurants. The local restaurants sell the pies (by the slice) to consumers for a total of $10,000. a. As a result of these transactions, GDP increases by: $ . b. The value added by George is: $ . The value added by Patty is: $ . The value added by the local restaurants is: $ .

10000 5000 3000 2000

Suppose a gold miner finds a gold nugget and sells the nugget to a mining company for $400. The mining company melts down the gold, purifies it, and sells it to a jewelry maker for $900. The jewelry maker fashions the gold into a necklace that it sells to a department store for $1,300. Finally, the department store sells the necklace to a customer for $1,700. As a result of these transactions, GDP increases by: $- .

1700

Suppose that the British economy produces two goods: laptops and books. The quantity produced and the prices of these items for 2015 and 2016 are shown in the table below: a. Let's assume that the base year was 2015, so that real GDP in 2015 equals nominal GDP in 2015. If the real GDP in Britain was $15,000 in 2015, the price of books was: $ . b. Using your answer from part (a), if the growth rate in nominal GDP was 15%, books must have been produced in 2016. c. Using your answers from parts (a) and (b), the growth rate in real GDP between 2015 and 2016 was: %.

A) Nominal GDP = price of good in current year * quantity of good in current year Real GDP = price of good in base year * quantity of good in current year In 2015, let price of book = x Therefore, in 2015, RGDP = $(200*50) + 1000x = $10000 + 1000x Given that, in 2015 RGDP = $15,000 Therefore, $10000 + 1000x = $15,000 Or, 1000x = $5000 Or, x = $5 The price of book was $5. B) In 2015, NGDP = RGDP = $15,000 If the growth rate of NGDP was 15%, then in 2016, NGDP = $15000 * (115/100) = $17,250 Let, quantity of books = x Therefore, $(90*170) + 8x = $17,250 Or, 15,300 + 8x = 17,250 Or, 8x = 1950 Or, x = 243.75 = 244 Therefore, 244 books must have been produced in 2016. C) in 2016, real GDP = $(90*200) + $(244*5) = $19,220 Growth rate in real GDP between 2015 and 2016 is [(19220 - 15,000)/15,000]*100 = (4220/15,000)*100 = 28.1%

The table below describes the real GDP and population of a fictional country in 2017 and 2018.

Ans a (i) Real GDP per capita = real GDP/population Calculation of real GDP per capita 2017 GDP 2017=$10 billion or $10000 million (1 billion = 1000 million) population (2017)= 2 million real GDP per capita = 10000/2 =$5000 million (ii) Calculation of Real GDP per capita 2018 GDP 2018 =$ 12 billion or 12000 million population =2.3 million real GDP per capita = 12000/2.3 = $5217.40 million Ans b growth rate of real GDP =GDP (2018) - GDP ( 2017)÷GDP (2017)×100 real GDP (2017) =10 billion real GDP (2018) =12 billion =12 -10÷10 ×100 = 2÷ 10 ×100 =20% Ans c growth rate of population = population in 2018 - population in 2017/÷population in 2017 ×100 = 2.3 - 2 ÷ 2 ×100 = 0.3÷2×100 =15 % Ans d growth rate of real GDP per capita = real GDP per capita (2018) - real GDP per capita (2017)÷real GDP per capita (2017) ×100 =5217 -5000 ÷5000 ×100 =217÷5000 ×100 =0.044×100 =4.4% or 4 %

Determine which category each of the following economic activities falls under: consumption, investment, government purchases, net exports, or not included in GDP. a. The mayor of Chicago authorizes the construction of a new stadium using public funds: b. A student pays rent on her apartment: c. Parents pay college tuition for their son: d. Someone buys a new Hyundai car produced in South Korea: e. Someone buys a used Hyundai car: f. Someone buys a new General Motors car produced in the United States: g. A family buys a house in a newly constructed housing development: h. The U.S. Army pays its soldiers: i. A Brazilian driver buys a Ford car produced in the United States: j. The Department of Motor Vehicles buys a new machine for printing drivers' licenses: k. An apple picked in Washington in October is bought at a grocery store in Mississippi in December: l. Hewlett-Packard produces a computer and sends it to a warehouse in another state for sale next year:

a) Government purchases b) Consumption c) Consumption d) Net exports Imports from Japan increases so increases imports component of US. e) Not included in GDP f) Consumption g) Investment h) Government spending i) Net exports Increases exports of the U.S j) Government k) Consumption l) Investment

The U.S. government gives income support to many families living in poverty. How does each of the following aspects of this policy contribute to GDP? a. Does this government's expenditure on income support count as part of GDP? If so, in which category of expenditure does it fall? b. When the families buy groceries with the money they've received, does this expenditure count as part of GDP? If so, in which category does it fall? c. If the families buy new houses with the money they've received, does this count as part of GDP? If so, in which category does it fall?

a) No it's a transfer payment. b) Yes it's a part of consumption. c) Yes,. Its a part of investment

Using the table below, calculate the indicated values. a. Total gross domestic product = $ million. GDP per person is $ . b. Consumption, investment, government spending, and net exports each as a percentage of total GDP. (Note: Enter your answers in the table below.) c. Consumption, investment, government spending, and net exports per person. (Note: Enter your answers in the table below.)

a. Total GDP = Consumption + Investment + Government Spending + Net Exports = $ (750,000 + 165,000 + 220,000 - 55,000) = $ 1,080,000 millions GDP per person = Total GDP / Total Population = $ 1,080,000/ 55 = $19,636.36

The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country. a. Using the standard expenditure method, the total contribution of this shirt to GDP is: b. If we use a value-added method (i.e., summing the value added by producers at each step of the production process, equal to the value of output minus the price of inputs), the contribution of this shirt to GDP is: c. If we mistakenly added the price of both intermediate inputs and final outputs without adjusting for value added, we would find that this shirt contributes: This overestimates the true contribution by: $ .

a. Using the standard expenditure method, Value of final output (shirt) = $18.60 thus, Total contribution of this shirt to GDP = $18.60 b. compute contribution at each step Contributioncotton farmer = $1.40 − $0 = $1.40. Contributionfabric maker = '$3.95 - $1.40 = $2.55 Contributionsewing & printing = $18.60 − $3.95 = $14.65 Using the value added method, Contribution of this shirt to GDP = Contributioncotton farmer + Contributionfabric maker + Contributionsewing & printing = $1.40 + $2.55 + $ 14.65 = $18.6 Using value added method, contribution of shirt to GDP is $18.6 c. Without adjusting for value added Sum of intermediate input and final output = $1.40 + $3.95 + 18.60 = $23.95 Without adjusting for value added, shirt contributes $23.95 to GDP This overestimates the rue contribution by $23.95 - $18.60 = $5.35

If the GDP deflator for the year that just ended is less than 100, it means that compared to the base year,

average prices have decreased

If Country X has a larger GDP than Country Y, in general the citizens of Country X -- (Click to select) will not will may or may not have a higher standard of living than the citizens in Country Y.

cannot use gdp

Suppose a parent was earning $20,000 per year working at a local firm. The parent then decides to quit his job in order to care for his child, who was being watched by a babysitter for $10,000 per year. With this action, GDP will

fall

Whether or not we measure the economy's expenditure or its income:

national production = national expenditure = national income.