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Exercises Chapter 2 Measuring National Output and National Income

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Exercises Chapter 2 Measuring National Output and National Income

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  1. Exercises Chapter 2 Measuring National Output and National Income

  2. Discussions 1. The total market value of all final goods and services produced within a given period by factors of production located within a country is • gross domestic product • gross national product • net national product • net national income

  3. Discussions 2. Gross domestic product measures • the total spending of everyone in the economy • the value of all output in the economy • the total income of everyone in the economy • All of the above

  4. Discussions 4.Double counting can be avoided by • including the value of intermediate goods in the current year. • not counting the value of intermediate goods in GDP • including the value of intermediate goods in the GNP but not in the GDP • including the value of intermediate goods in the production year but not in the selling year of those goods

  5. Discussions 5. Which of the following would NOT be counted in 2003's GDP? • The value of a 2001 car you purchase from a car dealer in 2003. • The 2003 salary of a used car salesperson • The commissions earned by a real estate agent in selling houses built prior to 2003 • The value of a computer manufactured in 2003 but not sold in 2003

  6. Discussions 6. Income of Mexican citizens earned in the U.S. counts in • U.S. GNP. • Mexican GNP • Mexican GDP • All of the above

  7. Discussions 7. The equation for GDP using the expenditure approach is • GDP = C + I + G + EX - IM. • GDP = C + I + G + (IM - EX). • GDP = C + I + G + EX + IM • GDP = C + I + G - EX - IM

  8. Discussions 8. The change in business inventories is measured as • final sales minus GDP. • final sales plus GDP • GDP minus final sales • the ratio of final sales to GDP

  9. Discussions 8. In 2004 final sales equal $100 billion, and the change in business inventories is $20 billion.GDP in 2004 is • $120 billion. • $110 billion • $80 billion • cannot be determined from this information

  10. Chapter 2 - Discussion Table 1

  11. Refer to Table 1, Personal consumption expenditures in billions of dollars areC = durable goods + non durable goods + services = 1650 2. Refer to Table 1, The value for gross private domestic investment in billions of dollars is I = Residential + Nonresidential + Changes in Inventory = 325 3. Refer to Table 1, The value for net exports in billions of dollars is Net export = Export – import = 500 – 150 = 350

  12. 4. Refer to Table 1 The value of government spending in billions of dollars is G = Federal purchase of goods + States and local purchase of goods =GDP = 300 + 250 = 550 5. Refer to Table 1 The value of gross domestic product in billions of dollars is GDP = C + I + G + (X – M) =GDP = 1650 + 325 + 550 + 350 = 2875

  13. Chapter 2 - Discussion Table 2.

  14. 1, Refer to Table 2. The value for GDP in billions of dollars is GDP = C + I + G + x - M I = Gross investment = Net investment + depreciation = 150 + 30 = 180GDP = 500 + 180 + 90 + 60 – 40 = 790 2. Refer to Table 2, The value for GNP in billions of dollars is GNP = GDP + receipts of factors of production from the rest of the world – payments of factors of production to the rest of the world = 790 + 20 – 40 = 770

  15. 3. Refer to Table 2. The value for NNP in billions of dollars is NNP= GNP – Depreciation = 770 – 30 = 740 4. Refer to Table 2, The value for national income in billions of dollars is National Income = NNP – Indirect taxes + subsidies National income = 740 – 0 + 0 = 740

  16. 5. Refer to Table 2. The value for PI in billions of dollars is PI = NI – amount of income not going to the households + dividends = 740 – 30 + 10 = 760 6. Refer to Table 2, The value for DPI in billions of dollars is DPI = PI – Personal taxes DPI = 760 – 90 = 670

  17. Table 3

  18. 1, Refer to Table 3. The value for GDP in millions of dollars is GDP = C + I + G + x - M C = DPI - Saving = 3250 - 900 = 2350Gross investment = net investment + depreciation = 1785 + 775 = 2560GDP = 2350 +2560 +3370 +960 – 350 = 8890 2. Refer to Table 3, The value for GNP in millions of dollars is GNP = GDP + Net payments of factor income to the rest of the world = 8890 + (- 890) = 8890 – 890 = 8000

  19. 3. Refer to Table 3. The value for NNP in millions of dollars is NNP= GNP – Depreciation = 8000 – 775= 7225 4. Refer to Table 3, The value for national income in billions of dollars is National Income = NNP – (Indirect taxes – subsidies) National income = 7225 – (12 – 320) = 7533

  20. Chapter 2 - Discussion Refer to the information provided in Table 4 below to answer the questions that follow.

  21. 1, Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 1Nominal GDP year 1 = Sum (P1 x q1)

  22. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 2Nominal GDP year 2 = Sum (P2 x q2)

  23. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 3Nominal GDP year 3 = Sum (P3 x q3)

  24. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's real GDP in year 2 is Real GDP12 = (P1 x q2)

  25. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's real GDP in year 3 is Real GDP 13 = (P1 x q3)

  26. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's real GDP in year 1 is Real GDP 11 = (P1 x q1)

  27. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 2 is the base year, the value for this economy's real GDP in year 1 is Real GDP21 = (P2 x q1)

  28. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 2 is the base year, the value for this economy's real GDP in year 2 is Real GDP22 = (P2 x q2)

  29. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 2 is the base year, the value for this economy's real GDP in year 3 is Real GDP23 = (P2 x q3)

  30. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 3 is the base year, the value for this economy's real GDP in year 1 is Real GDP31 = (P3 x q1)

  31. Refer to Table 4. Assume that this economy produces only two goods Good X and Good Y. If year 3 is the base year, the value for this economy's real GDP in year 2 is Real GDP32 = (P3 x q2)

  32. Calculate GDP Deflator and Inflation in the following cases

  33. Calculating GDP Deflator and Inflation

  34. Calculate GDP Deflator and Inflation in the following cases

  35. Discussions The GDP deflator is the • difference between real GDP and nominal GDP multiplied by 100. • difference between nominal GDP and real GDP multiplied by 100 • ratio of nominal GDP to real GDP multiplied by 100 • ratio of real GDP to nominal GDP multiplied by 100