Chapter 5, Gross Domestic Product Video Solutions, Macroeconomics for Today

Problem 1

1. Which of the following are final goods or services, and which are intermediate goods or services?
a. A haircut purchased from a barber
b. A new automobile
c. An oil filter purchased in a new automobile
d. Crude oil

Ansh Varma

Numerade Educator

02:40

Problem 2

Using the basic circular flow model, explain why the value of businesses' output of goods and services equals the income of households.

Shivani Sharma

Numerade Educator

06:34

Problem 3

A small economy produced the following final goods and services during a given month: 3 million pounds of food, 50,000 shirts, 20 houses, 50,000 hours of medical services, 1 automobile plant, and 2 tanks. Calculate the value of this output at the following market prices:

$\bullet$ $$\$1$$ per pound of food
$\bullet$ $$\$ 20$$ per shirt
$\bullet$ $$\$ 50,000 $$ per house
$\bullet$ $$\$ 20$$ per hour of medical services
$\bullet$ $$\$1 $$ million per automobile plant
$\bullet$ $$\$ 500,000$$ per tank

Oluwadamilola Ameobi

Numerade Educator

01:00

Problem 4

An economy produces final goods and services with a market value of $$\$ 5,000$$ billion in a given year, but only $$\$ 4,500$$ billion worth of goods and services is sold to domestic or foreign buyers. Is this nation's GDP $$\$ 5,000$$ billion or $$\$ 4,500$$ billion? Explain your answer.

Riham Bassal

Numerade Educator

02:29

Problem 5

Explain why a new forklift sold for use in a warehouse is a final good even though it is fixed investment (capital) used to produce other goods. Is there a double-counting problem if this sale is added to GDP?

Pragya Ahuja

Numerade Educator

04:09

Problem 6

Explain why the government spending $(G)$ component of GDP falls short of actual government expenditures.

Md.Daniyal Arshad

Numerade Educator

02:21

Problem 7

Explain how net exports affect the U.S. economy. Describe both positive and negative impacts on GDP. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other expenditure components of GDP?

John Coffey

Numerade Educator

04:44

Problem 8

Suppose the data in Exhibit 11 are for a given year from the annual Economic Report of the President. Calculate GDP, using the expenditure and the income approaches.

Sandile Ndlovu

Numerade Educator

02:14

Problem 9

Using the data in Exhibit 11, compute national income (NI) by making the required subtraction from GDP. Explain why NI might be a better measure of economic performance than GDP.

Kaylee Mcclellan

Numerade Educator

02:12

Problem 10

Again using the data from Exhibit 11, derive personal income (PI) from national income (NI). Then make the required adjustments to PI to obtain disposable personal income (DI).

Kaylee Mcclellan

Numerade Educator

18:34

Problem 11

Suppose U.S. nominal GDP increases from one year to the next year. Can you conclude that these figures present a misleading measure of economic growth? What alternative method would provide a more accurate measure of the rate of growth?

Paul A.

California State Polytechnic University, Pomona

09:24

Problem 12

Which of the following are counted in this year's GDP? Explain your answer in each case.
a. Flashy Car Company sold a used car.
b. Juanita Jones cooked meals for her family.
c. IBM paid interest on its bonds.
d. José Suarez purchased 100 shares of IBM stock.
e. Bob Smith received a welfare payment.
f. Carriage Realty earned a brokerage commission for selling a previously owned house.
g. The government makes interest payments to persons holding government bonds.
h. Air and water pollution increase.
i. Gambling is legalized in all states.
j. A retired worker receives a Social Security payment.

John Coffey

Numerade Educator

05:48

Problem 13

Explain why comparing the GDPs of various nations might not tell you which nations are better off.

Oluwadamilola Ameobi

Numerade Educator