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Chapter 7: Q7. (page 153)
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.
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Suppose GDP is \(15 trillion, with \)8 trillion coming from consumption, \(2.5 trillion coming from gross investment, \)3.5 trillion coming from government expenditures, and \(1 trillion coming from net exports. Also suppose that across the whole economy, personal income is \)12 trillion. If the government collects \(1.5 trillion in personal taxes, then disposable income is:
a. \)13.5 trillion
b. \(12.0 trillion
c. \)10.5 trillion
d. none of the above
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.
Using the above data, determine GDP by both the expenditures approach and the income approach. Then determine NDP.
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.
Adjust NI (from part b) as required to obtain PI.
Adjust PI (from part c) as required to obtain DI.
Which of the following transactions are counted in GDP?Select one or more answers from the choices shown.
a. Kerry buys a new sweater to wear this winter.
b. Patricia receives a Social Security check.
c. Roberto gives his daughter \(50 for her birthday.
d. Nayana sells \)1,000 of General Electric stock.
e. Jasmine buys a new car.
f. Molly buys a used car
Suppose that annual output in year 1 in a three-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are \(4 per quart for ice cream, \)3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s GDP in year 1? What was its GDP in year 2?
Why do national income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production? What problem is posed by any comparison over time of the market values of various total outputs? How is this problem resolved?
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