Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 24.A, Problem 1TY
To determine
The transactions included in the
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Students have asked these similar questions
As an economist with the World Bank you have been asked to measure the Gross Domestic Product for the US for 2019. You are told that the private consumption, gross domestic investment, government purchases and exports all add up to $ 24 trillion. You later learn that imports to the US in 2019 were $4 trillion. To get GDP, you should
A.
Ignore the $ 4 trillion because exports have already been included in the $ 24 trillion
B.
Add $ 4 trillion to $24 trillion because imports are used as inputs in the production of other goods in the US
C.
None of the above
D.
Subtract $4 trillion from $24 trillion because imports are not part of US domestic output
In each of the following cases, determine how much GDP and each of its components is affected (if at all).
Rabia spends $200 to buy her husband dinner at the finest restaurant in Karachi.
Sarah spends $1800 on a new laptop to use in her publishing business. The laptop was built in
Sadia spends $1200 on a computer to use in her editing business. She got last year’s model on sale for a great price from a local manufacturer.
General Motors builds $500 million worth of cars, but consumers only buy $470 million worth of them.
A country has just one resource - labor - that it can use to produce two goods, books and clothing.
At first the country has 10 million workers, and each worker can produce either 2 books or 5 units of
clothing per day.
Suppose the country wants to produce 8 million books.
Suppose the price of a book is $10, and the price of a unit of clothing is $20. Using this
information and your answer from the last question, calculate the country's GDP (measured in
dollars per day). Enter your answer as a number in the space below. (For example, if your
answer is $3.75 million, enter it as 3750000 in the space below.)
Chapter 24 Solutions
Economics: Principles & Policy
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- Which of the following transactions should or should not be counted in GDP? Answer Yes or No and briefly explain your answer. Answers without explanation will not be considered in grading, even if they are correct. a. You buy a pair of new cowboy boots on a trip to Texas b. You buy a pair of vintage cowboy boots from your cousin in El Paso c. A cat burglar sells $10,000 of stolen jewelry to a fence d. Amazon issues $1 billion worth of new shares e. GM purchases $100 million worth of tires from Firestone f. A private company builds a new road in Memphis Y g. Stay-at-home parents provide an estimated $500 million of child care servicesarrow_forwardI. The sale of a house from an existing homeowner to an incoming homeowner in a subdivision is included in the computation of GDP II. The purchase of stocks and bonds is not included in the computation of GDP III. Broker's commissions for the sale of financial instruments is included in the computation of GDP IV. The lawyer's fees to facilitate the transfer of title of an existing house from one homeowner to another is included in the computation of GDP O Only Statement Il is false O Only Statement I is false All Statements are false Only Statements III and IV are true O All Statements are truearrow_forwardHow would each of the following transactions affect the GDP of the United States (Increase, decrease, or does not change)? The U.S. government pays $1 billion in salaries for government workers. GDP will... The U.S. government pays $1 billion to Social Security recipients. GDP will... The U.S. government pays a U.S. firm $1 billion for newly produced airplane parts. GDP will... The U.S. government pays $1 billion in interest to holders of U.S. government bonds. GDP will...arrow_forward
- Consumption $400 Imports $ 10 Net investment $ 20 Government purchases $ 100 Exports $ 20 Capital consumption allowance $ 20 Statistical discrepancy $ 6 Receipts of factor income from the rest of the world $ 10 Payments of the factor income to the rest of the world $ 13 What is the GDP for this economy? What is the GNP for this economy? What is the NNP for this economy? What is the national income for this economy? What is the gross investment in for this economy?arrow_forward2020 Q2 GDP (in 2020 Q3 Nigerian currency) 790,000 million 2020 Q2 GDP (in 2018 Nigerian currency) 835,000 million 2020 Q3 Consumption (in 2020 Q3 Nigerian currency) 369,000 million 2020 Q3 Central (Federal) Government Spending (in 2020 Q3 Nigerian currency) 111,000 million 2020 Q3 Local Government Spending (in 2020 Q3 Nigerian currency) 114,000 million 2020 Q3 Investment (in 2020 Q3 Nigerian currency) 223,000 million 2020 Q3 Exports (in 2020 Q3 Nigerian currency) 255,000 million 2020 Q3 Imports (in 2020 Q3 Nigerian currency) 277,000 million 2020 Q3 Consumption (in 2018 Nigerian currency) 357,000 million 2020 Q3 Central (Federal) Government Spending (in 2018 Nigerian currency) 106,000 million 2020 Q3 Local Government Spending (in 2018 Nigerian currency) 108,000 million 2020 Q3 Investment (in 2018 Nigerian currency) 211,000 million 2020 Q3 Exports (in 2018 Nigerian currency) 328,000 million 2020 Q3 Imports (in 2018 Nigerian currency) 260,000 million 2020 Q2 Population 5.37…arrow_forward2020 Q2 GDP (in 2020 Q3 nigerian currency) 790,000 million 2020 Q2 GDP (in 2018 nigerian currency) 835,000 million 2020 Q3 Consumption (in 2020 Q3 nigerian currency) 369,000 million 2020 Q3 Central (Federal) Government Spending (in 2020 Q3 nigerian currency) 111,000 million 2020 Q3 Local Government Spending (in 2020 Q3 nigerian currency) 114,000 million 2020 Q3 Investment (in 2020 Q3 nigerian currency) 223,000 million 2020 Q3 Exports (in 2020 Q3 nigerian currency 255,000 million 2020 Q3 Imports (in 2020 Q3 nigerian currency 277,000 million 2020 Q3 Consumption (in 2018 nigerian currency) 357,000 million 2020 Q3 Central (Federal) Government Spending (in 2018 nigerian currency) 106,000 million 2020 Q3 Local Government Spending (in 2018 nigerian currency) 108,000 million 2020 Q3 Investment (in 2018 nigerian currency) 211,000 million 2020 Q3 Exports (in 2018 nigerian currency) 328,000 million…arrow_forward
- 2020 Q2 GDP (in 2020 Q3 Nigerian currency) 790,000 million 2020 Q2 GDP (in 2018 Nigerian currency) 835,000 million 2020 Q3 Consumption (in 2020 Q3 Nigerian currency) 369,000 million 2020 Q3 Central (Federal) Government Spending (in 2020 Q3 Nigerian currency) 111,000 million 2020 Q3 Local Government Spending (in 2020 Q3 Nigerian currency) 114,000 million 2020 Q3 Investment (in 2020 Q3 Nigerian currency) 223,000 million 2020 Q3 Exports (in 2020 Q3 Nigerian currency) 255,000 million 2020 Q3 Imports (in 2020 Q3 Nigerian currency) 277,000 million 2020 Q3 Consumption (in 2018 Nigerian currency) 357,000 million 2020 Q3 Central (Federal) Government Spending (in 2018 Nigerian currency) 106,000 million 2020 Q3 Local Government Spending (in 2018 Nigerian currency) 108,000 million 2020 Q3 Investment (in 2018 Nigerian currency) 211,000 million 2020 Q3 Exports (in 2018 Nigerian currency) 328,000 million…arrow_forward2020 Q2 GDP (in 2020 Q3 Nigerian currency) 790,000 million 2020 Q2 GDP (in 2018 Nigerian currency) 835,000 million 2020 Q3 Consumption (in 2020 Q3 Nigerian currency) 369,000 million 2020 Q3 Central (Federal) Government Spending (in 2020 Q3 Nigerian currency) 111,000 million 2020 Q3 Local Government Spending (in 2020 Q3 Nigerian currency) 114,000 million 2020 Q3 Investment (in 2020 Q3 Nigerian currency) 223,000 million 2020 Q3 Exports (in 2020 Q3 Nigerian currency) 255,000 million 2020 Q3 Imports (in 2020 Q3 Nigerian currency) 277,000 million 2020 Q3 Consumption (in 2018 Nigerian currency) 357,000 million 2020 Q3 Central (Federal) Government Spending (in 2018 Nigerian currency) 106,000 million 2020 Q3 Local Government Spending (in 2018 Nigerian currency) 108,000 million 2020 Q3 Investment (in 2018 Nigerian currency) 211,000 million 2020 Q3 Exports (in 2018 Nigerian currency) 328,000 million…arrow_forwardSouth Africa has a GDP of $10 billion (measured in U.S. dollars) and a population of 45 million. Ecuador has a GDP of $12 billion (measured in U.S. dollars) and a population of 4.5 million. Calculate per capita GDP for each country. Question 24 options: South Africa = $222.22; Ecuador = $2,666.67 South Africa = $22.22; Ecuador = $266.67 South Africa = $2222.22; Ecuador = $26,666.67 South Africa = $22.22; Ecuador = $2,666.67arrow_forward
- Which of the following will cause GDP to increase? a) I hire my neighbor's teenage son to mow my lawn and he does NOT report it on his taxes as income. b) I clean my house myself. c) My neighbor feeds my dog while I am on vacation as a favor to me. d) None of the choice listed will increase GDP. e) I sell the used minivan I bought 10 years ago for half what I paid for it.arrow_forwardConsider the following table showing the breakdown of GDP (in billions) for China. GDP Category Amount (in billions) Wages and Salaries 1000 Consumption 1700 Investment 700 Depreciation 50 Government Expenditure 100 Taxes 300 Exports 50 Imports 40 Income receipts from rest of the world 10 Income payment to rest of the world 50 1. What are net exports for China? 2. Suppose that GDP in Japan is 1030 and then grows to 1160 (all numbers in billions) what is the growth rate of GDP in Japan?arrow_forwardGo online and find the current GDP for countries, which are the largest countries in the world in terms of GDP. Find a PPP GDP, which are the largest countries now? Why the difference?arrow_forward
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