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Macroeconomics

David Colander

Chapter 8

Measuring the Aggregate Economy - all with Video Answers

Educators

Chapter Questions

Problem 1

What expenditure category of production is largest for most countries? LO1

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01:04

Problem 2

What's the relationship between a stock concept and a flow concept? Give an example that hasn't already been given in this chapter. LO1

Jennifer Stoner
Jennifer Stoner
Numerade Educator
01:57

Problem 3

State whether the following actions will increase or decrease GDP:
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. LO1

EA
Erwin Antoni
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00:59

Problem 4

If you add up all the transactions in an economy, do you arrive at GDP, GNP, or something else? LO2

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:26

Problem 5

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? LO2

Jennifer Stoner
Jennifer Stoner
Numerade Educator
02:45

Problem 6

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 $\mathrm{C}$ buys $$\$ 50$$ worth of goods from firm $\mathrm{A}$ 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? LO2

Jesse Neumann
Jesse Neumann
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01:52

Problem 7

If the government increases transfer payments, what happens to aggregate output? LO2

Kaylee Mcclellan
Kaylee Mcclellan
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02:00

Problem 8

Economists normally talk about GDP even though they know NDP is a better measure of economic activity. Why? LO3

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
02:37

Problem 9

Which will be larger, gross domestic product or gross national product? LO3

Yang Su
Yang Su
Numerade Educator
02:25

Problem 10

You've been given the following data:
$$
\begin{array}{lr}
\hline \text { Net exports } & \$ 4 \\
\text { Net foreign factor income } & 2 \\
\text { Investment } & 185 \\
\text { Government spending } & 195 \\
\text { Consumption } & 500 \\
\text { Depreciation } & 59 \\
\hline
\end{array}
$$
From these data, calculate GDP, GNP and NDP. LO3

Heather Duong
Heather Duong
Numerade Educator
02:37

Problem 11

What is the largest component of aggregate income for most countries? LO4

Yang Su
Yang Su
Numerade Educator
04:54

Problem 12

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. LO1, LO3, LO4

Doris Bennett
Doris Bennett
Numerade Educator

Problem 13

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? LO1, LO3, LO4

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02:37

Problem 14

What income category keeps aggregate output and aggregate income equal? LO5

Yang Su
Yang Su
Numerade Educator
01:25

Problem 15

What makes it difficult to compare GDP over time? How is the problem addressed? LO6

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
18:34

Problem 16

Below are nominal GDP and GDP deflators for four years.
$$
\begin{array}{ccc}
\hline \text { Year } & \text { Nominal GDP in billions } & \text { GDP Deflator } \\
\hline 2005 & \$ 12,421.9 & 113.0 \\
2006 & 13,178.4 & 116.7 \\
2007 & 13,807.5 & 119.8 \\
2008 & 14,264.6 & 122.4 \\
\hline
\end{array}
$$
a. Calculate real GDP in each year.
b. Did the percentage change in nominal GDP exceed the percentage change in real GDP in any of the last three years listed?
c. In which year did society's welfare increase the most? LO6

Paul A.
Paul A.
California State Polytechnic University, Pomona