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Economics

David C. Colander

Chapter 25

Measuring and Describing the Aggregate Economy - all with Video Answers

Educators

Chapter Questions

01:04

Problem 1

What’s the relationship between a stock concept and a flow concept?

Jennifer Stoner
Jennifer Stoner
Numerade Educator
03:01

Problem 2

What expenditure category of production is largest for most countries?

David Gagnon
David Gagnon
Numerade Educator
05:45

Problem 3

How do wealth accounts differ from national income accounts?

Crystal Wang
Crystal Wang
Numerade Educator
01:57

Problem 4

State whether the following actions will increase or $\begin{array}{ll}\text { decrease GDP: } & \text { ( } L O 25-1)\end{array}$
a. The United States legalizes gay marriages.
b. An individual sells her house on her own.
c. An individual sells his house through a broker.
d. Government increases Social Security payments.
e. Stock prices rise by 20 percent.
f. An unemployed worker gets a job.

EA
Erwin Antoni
Numerade Educator
00:59

Problem 5

If you add up all the transactions in an economy, do you arrive at GDP, GNP, or something else?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:26

Problem 6

The United States is considering introducing a valueadded tax. What tax rate on value added is needed to get the same revenue as is gotten from an income tax rate of 15 percent?

Jennifer Stoner
Jennifer Stoner
Numerade Educator
01:21

Problem 7

There are three firms in an economy: A, B, and C. Firm A buys $250 worth of goods from firm B and $200 worth of goods from firm C, and produces 200 units of output, which it sells at $5 per unit. Firm B buys $100 worth of goods from firm A and $150 worth of goods
from firm C, and produces 300 units of output, which it sells at $7 per unit. Firm C buys $50 worth of goods from firm A and nothing from firm B. It produces output worth $1,000. All other products are sold to consumers.
a. Calculate GDP.
b. If a value-added tax (a tax on the total value added of each firm) of 10 percent is introduced, how much revenue will the government get?
c. How much would government get if it introduced a 10 percent income tax?
d. How much would government get if it introduced a 10 percent sales tax on final output?

Kratika Bhadauria
Kratika Bhadauria
Numerade Educator
01:52

Problem 8

If the government increases transfer payments, what happens to aggregate output?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:00

Problem 9

Economists normally talk about GDP even though they know NDP is a better measure of economic activity. Why?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
02:37

Problem 10

Which will be larger, gross domestic product or gross national product?

Yang Su
Yang Su
Numerade Educator
02:25

Problem 11

You’ve been given the following data:
$$
\begin{array}{lr}
\hline & \\
\text { Net exports } & \$ 4 \\
\text { Net foreign factor income } & 2 \\
\text { Investment } & 185 \\
\text { Government spending } & 195 \\
\text { Consumption } & 500 \\
\text { Depreciation } & 59 \\
&
\end{array}
$$
From these data, calculate GDP, GNP and NDP.

Heather Duong
Heather Duong
Numerade Educator
02:37

Problem 12

What is the largest component of aggregate income for most countries?

Yang Su
Yang Su
Numerade Educator
04:54

Problem 13

Given the following data about the economy:
$$
\begin{array}{lr}
\hline \text { Profit } & \$ 268 \\
\text { Consumption } & 700 \\
\text { Investment } & 500 \\
\text { Government spending } & 300 \\
\text { Net exports } & 275 \\
\text { Rent } & 25 \\
\text { Depreciation } & 25 \\
\text { Net foreign factor income } & 3 \\
\text { Interest } & 150 \\
\text { Compensation to employees } & 1,329 \\
& \\
\hline
\end{array}
$$
a. Calculate aggregate output (GDP) and aggregate income.
b. Compare the two calculations in $a$. Why are they not precisely equal?
c. Calculate GNP.
d. Calculate NDP.

Doris Bennett
Doris Bennett
Numerade Educator
04:54

Problem 14

You have been hired as a research assistant and are given the following data.
$$
\begin{array}{lr}
\hline \text { Compensation to employees } & \$ 329 \\
\text { Consumption } & 370 \\
\text { Exports } & 55 \\
\text { Net foreign factor income } & 3 \\
\text { Government spending } & 43 \\
\text { Investment } & 80 \\
\text { Imports } & 63 \\
\text { Interest } & 49 \\
\text { Profit } & 96 \\
\text { Rent } & 14 \\
\text { Net Investment } & 72 \\
& \\
\hline
\end{array}
$$
a. Calculate GNP, GDP, and aggregate income.
b. What is depreciation in this year?
c. What is NDP?

Doris Bennett
Doris Bennett
Numerade Educator
02:37

Problem 15

What income category keeps aggregate output and aggregate income equal?

Yang Su
Yang Su
Numerade Educator
00:35

Problem 16

If an economy has a trade surplus, is domestic production higher or lower than domestic expenditures? Explain your answer.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:25

Problem 17

What makes it difficult to compare GDP over time? How is the problem addressed?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:52

Problem 18

Below are nominal GDP and GDP deflators for four years.
$$
\begin{array}{lcc}
\hline & & \\
\text { Year } & \text { Nominal GDP in billions } & \text { GDP Deflator } \\
\hline \text { Year } 1 & \$ 18,000 & 100 \\
\text { Year } 2 & 18,540 & 103 \\
\text { Year } 3 & 19,467 & 104 \\
\text { Year } 4 & 20,246 & 106 \\
\hline
\end{array}
$$

Karan Sood
Karan Sood
Numerade Educator
View

Problem 19

Fill in the missing values in the table below:
$$
\begin{array}{ccc}
\hline & & \\
\begin{array}{c}
\text { Real Interest } \\
\text { Rate }
\end{array} & \begin{array}{c}
\text { Nominal Interest } \\
\text { Rate }
\end{array} & \text { Inflation } \\
\hline 5 & 7 & - \\
4 & - & 3 \\
- & 12 & 9 \\
& & \\
\hline
\end{array}
$$

Susan Hallstrom
Susan Hallstrom
Numerade Educator
01:29

Problem 20

You find that real GDP per capita in Burundi is $800 while real GDP per capita in the United States is $50,000. What is misleading about these figures when comparing standards of living?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
00:25

Problem 21

When more and more women entered the labor force in the 1970s and 1980s, the economy’s potential output rose.
a. To the extent that real output rose because of their entry into the labor market, what was the effect on measured GDP?
b. What was the impact on welfare?

Christopher Dzorkpata
Christopher Dzorkpata
Numerade Educator
01:26

Problem 22

The Genuine Progress Indicator is an alternative measure to economic activity.
a. Is the Genuine Progress Indicator a subjective measure of the economy? Explain your answer.
b. Is GDP a subjective measure? Explain your answer.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator