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Chapter 7: Q10. (page 152)

Suppose GDP is \(5.0 trillion, depreciation is \)1 trillion, and gross output (GO) is $17.25 trillion.

a. What is the value of all stages of production and distribution except for final sales of goods and services?

b. What is the dollar value of the economic activity taking place at every stage of production and distribution?

Short Answer

Expert verified

  1. $12.5 trillion

  2. $17.5 trillion

Step by step solution

01

Explanation for part (a)

The value of all stages of production and distribution except for final sales of goods and services is the difference between the gross output and GDP. The gross output is the sum of the total value of the sales at each stage of production and distribution.

Total value of all stages except final sales = GO - GDP

= $17.5 trillion - $5 trillion

= $12.5 trillion

02

Explanation for part (b)

The dollar value of economic activities at every stage of production and distribution of a good or service is given by the Gross output (GO) and hence is equal to $17.5 trillion.

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Most popular questions from this chapter

Why do economists include only final goods and services when measuring GDP? Why don’t they include the value of the stocks and bonds bought and sold? Why don’t they include the value of the used furniture bought and sold?

The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.

Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and income approaches. The results you obtain with the different methods should be the same.

  1. Using the above data, determine GDP by both the expenditures approach and the income approach. Then determine NDP.

  2. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of income and taxes that makeup NI.

  3. Adjust NI (from part b) as required to obtain PI.

  4. Adjust PI (from part c) as required to obtain DI.

Which of the following are included in this year’s GDP? Which are excluded? Explain your answers.

a. Interest received on an AT&T corporate bond.

b. Social Security payments received by a retired factory worker.

c. Unpaid services of a family member who painted the family home.

d. Income of a dentist from the dental services she provided.

e. A monthly allowance that a college student receives from home.

f. Money received by Josh when he resells his nearly brand-new Honda automobile to Kim.

g. The publication and sale of a new college textbook.

h. An increase in leisure resulting from a 2-hour decrease in the length of the workweek, with no reduction in pay.

i. A $2 billion increase in business inventories.

j. The purchase of 100 shares of Alphabet (the parent company of Google) stock.

Suppose that this year’s nominal GDP is \(16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago. Using that index, we find that this year’s real GDP is \)15 trillion. Given those numbers, we can conclude that the current value of the index is:

a. higher than 100.

b. lower than 100.

c. still 100.
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