1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.
2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.
Year
Good X
Good Y
2005
$3
$6
2006
4
7
2007
4.5
7.5
3. Using the expenditure approach, calculate GDP using the following data.
Item
Amount in dollars (billions)
Consumption
7,600
Consumption of Durable Goods
1,600
Consumption of Non Durable Goods
2,800
Consumption of Services
3,200
Investment
2,750
Fixed Investment
1,000
Government purchases of Goods & Services
1,675
Government Transfer Payments
450
Exports
750
Imports
1,600
GDP Equals
4. a. What is the importance of measuring per capita GDP?
b. Why nominal GDP can be misleading?
1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.
2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.
|
Year |
Good X |
Good Y |
|
2005 |
$3 |
$6 |
|
2006 |
4 |
7 |
|
2007 |
4.5 |
7.5 |
3. Using the expenditure approach, calculate GDP using the following data.
|
Item |
Amount in dollars (billions) |
|
Consumption |
7,600 |
|
Consumption of Durable Goods |
1,600 |
|
Consumption of Non Durable Goods |
2,800 |
|
Consumption of Services |
3,200 |
|
Investment |
2,750 |
|
Fixed Investment |
1,000 |
|
Government purchases of Goods & Services |
1,675 |
|
Government Transfer Payments |
450 |
|
Exports |
750 |
|
Imports |
1,600 |
|
GDP Equals |
4. a. What is the importance of measuring per capita GDP?
b. Why nominal GDP can be misleading?
Related textbook solutions
Related questions
6. Using the expenditure approach, calculate GDP using the following data.
|
Item |
Amount in dollars (billions) |
|
Consumption |
7,600 |
|
Consumption of Durable Goods |
1,600 |
|
Consumption of Non Durable Goods |
2,800 |
|
Consumption of Services |
3,200 |
|
Investment |
2,750 |
|
Fixed Investment |
1,000 |
|
Government purchases of Goods & Services |
1,675 |
|
Government Transfer Payments |
450 |
|
Exports |
750 |
|
Imports |
1,600 |
|
GDP Equals |
|
7. What is the importance of measuring per capita GDP?
8. What is the underground economy? How does it affect GDP calculations? Provide three examples of underground economy transactions
Question 1
The law of demand states that there is a direct relationship between supply and demand.
True
False
4 points
Question 2
Equilibrium is a state of balance between supply and demand.
True
False
4 points
Question 3
Goods are scarce for both rich and poor.
True
False
4 points
Question 4
"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.
True
False
4 points
Question 5
The law of supply states that there is a direct relationship between price and quantity demanded.
True
False
4 points
Question 6
In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.
True
False
4 points
Question 7
Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.
True
False
4 points
Question 8
Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.
True
False
4 points
Question 9
Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.
True
False
4 points
Question 10
Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.
True
False
4 points
Question 11
Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".
True
False
4 points
Question 12
The production possibilities frontier assumes that the level of technologyvaries when applying the model.
True
False
4 points
Question 13
Excess demand in the market will cause the price of a product to decline.
True
False
4 points
Question 14
Demand is measured on the vertical axis and supply on the horizontalaxis.
True
False
4 points
Question 15
A change in quantity demanded is a movement along the same demandcurve.
True
False
4 points
Question 16
As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.
True
False
4 points
Question 17
Which growth theory compares a subsistence real wage rate to the actual real wage rate?
| Classical growth theory | ||
| Inflation growth theory | ||
| Neoclassical growth theory | ||
| New growth theory |
4 points
Question 18
Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.
| unemployment rate; 25/100 Ã 100 | ||
| employment rate; 25/75 Ã 100 | ||
| labor force; 75 | ||
| labor force; 25/100 Ã 100 |
4 points
Question 19
Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:
| increases. | ||
| decreases. | ||
| does not change because there is no change in the money wage rate. | ||
| increases only if the price level also decreases. |
4 points
Question 20
GDP can be computed as the sum of:
| all sales that have taken place in an economy over a period of time. | ||
| the total expenditures of consumers and business over a period of time. | ||
| the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. | ||
| the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time. |
4 points
Question 21
The real wage rate equals:
| (100 x (money wage rate/price level) | ||
| (100 x (price level/money wage rate) | ||
| (money wage rate x (price level) | ||
| (money wage + (number of hours worked/(price level) |
4 points
Question 22
If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:
| 10.2 percent. | ||
| 13.8 percent. | ||
| 12.2 percent. | ||
| 16.8 percent. |
4 points
Question 23
A movement along the production function is the result of a change in:
| the quantity of labor. | ||
| technology. | ||
| capital. | ||
| interest rates. |
4 points
Question 24
All of the following are part of fiscal policy EXCEPT:
| setting tax rates. | ||
| setting government spending. | ||
| choosing the size of the government deficit. | ||
| controlling the money supply. |
4 points
Question 25
Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:
| decreases. | ||
| increases. | ||
| stays the same. | ||
| could increase, decrease or stay the same. |
