Question 1. Calculating GDP & CPI. Use the three different ways to calculate GDP learned in class to calculate the GDP of the following economy. (Hint: All three methods will give you the same answer). (15 minutes) Company 1 (Milkshakes) $8 Money from sales to public $15 Money spent on ice cream $3 Rent (land and equipment) $30 Wages and Salaries $44 Profit Company 3 (Dairy Farm (Milk)) $6 Sales to Ice Cream company $2 Rent (land and equipment) $1 Wages and Salaries $3 Profit Company 5 (Book Publisher) $40 Sales to the public $80 Sales overseas (exported) $40 Purchase of Paper $15 Payments to authors (their salary) $22 Wages and Salaries $7 Rent (land and equipment) $36 Profit Company 2 (Ice Cream) $15 Sales to Milkshake Company $7 Sales to the public $6 Cost of Milk $4 Rent (land and equipment) $3 Wages and Salaries $9 Profit Company 4 (Lumber (Wood)) $10 Sales to Paper Mill $3 Rent (land and equipment) $3 Wages and Salaries $4 Profit Company 6 (Paper Mill) $40 Sales to the Book Publisher Additionally $71 Value of Imported Cars by consumers Total Wages: Total Rents: Books: Purchases: Milkshakes: 1.1 Income Method GDP: Profits: 1.2 Expenditure Method GDP: Plus Exports: Minus Imports: 1.3 Value Added Method GDP: Milk: Wood: 2.1-2.2 Fill out the table below taking 2018 as base year: Paper: Ice Cream: Total Question 2. Calculating GDP & CPI. Suppose you are in an economy where the only two goods are beer and pizza. The following table shows the price of beer and pizza in each year and the quantity sold. (15 minutes) 2.1-2.2 Fill out the table below taking 2018 as base year
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For Company 1 (Milkshakes): Wages and Salaries: $30 Rent: $3 Profit: $44 For Company 3 (Dairy Farm): Wages and Salaries: $1 Rent: $2 Profit: $3 For Company 5 (Book Publisher): Wages and Salaries: $22 Rent: $7 Profit: $36 For Company 2 (Ice Cream): Wages and Show more…
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(Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the growth rate of real GDP in 2009 if 2008 prices are used in the calculation of real GDP? A) –3.71% B) –1.97% C) 1.00% D) 2.94% (Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. If 2008 prices are used in the calculation of real GDP, then nominal GDP in 2009 is _____ and real GDP in 2009 is _____. A) $34,310; $33,700 B) $35,350; $34,310 C) $33,700; $35,000 D) $35,000; $33,700 (Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the growth rate of real GDP in 2009 if 2009 prices are used in the calculation of real GDP? A) –3.71% B) –2.94% C) –1.97% D) 1.00% (Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the real GDP in 2009 if 2009 prices are used in the calculation of real GDP? A) $33,700 B) $35,000 C) $34,310 D) $35,350 Table: Three-Good Economy II Product Quantity (2008) Price (2008) Quantity (2009) Price (2009) Computers 30 $1,000 28 $995 Pizzas 100 10 150 15 Burgers 200 200 210 20
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Since we use GDP to determine a nation's health, we can only add the market value of the goods and services produced in the United States (domestic production) for a single year. We also do not add the value of intermediate goods, ingredients/items used to produce final products. We only count the value of final goods and services which have been produced within the year. Including the value of both the intermediate goods and the final goods and services would lead to double counting and increase the value of GDP. Directions: For each item, place either an "I" if the scenario is an intermediate product or an "F" if it is a final product. a. Shampoo is bought and used by a hair stylist in the mall. b. A family buys some finger paint for their child to use. c. A person buys a tire to replace a flat one on their car. d. A hotel chain buys a box of pens. e. Flour is bought and used to bake a cake to be sold at a bakery. f. Someone buys a steak to grill at home. g. An accounting firm buys calculators for its accountants. h. A person buys shampoo to use at home. i. Flour is bought and used to bake a cake for a birthday. j. A student buys a pack of pens to do their homework. k. A restaurant prepares a steak for its customers. l. A factory buys tires to place on their cars. m. An artist buys paints for a painting, with the intention of keeping it. n. A calculator is bought and used for mathematics homework. o. An artist buys paints for a landscape painting, with the intention of selling it.
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