CNM ECON2200 – To calculate GDP using the expenditures

Homework – Chapter 7A. 1. To calculate GDP using the expenditures (aggregate spending) approach which of the following would beincluded (pick all that apply – there will be more than one)?a.b.c.d.e.f. Consumer spendingExportsGovernment purchasesImportsInterestInvestment spending g.h.i.j.k. Private savingsProfitRentTaxesWages 2. Using the expenditure approach, GDP in the economy shown above is equal to:______ + _____ + _____ + _____ – _____ = GDPFill the blanks with the letters used in the text and notes to abbreviate each of the items you chose in Question1. (Not the letters used for choices in Q1.)For this economy, using the expenditures approach, GDP would equal $ __________ .3. To calculate GDP using the income approach which of the following would be included (pick all that apply)?a.b.c.d.e.f.m.n.o.p.q.r. Consumer spendingExportsGovernment purchasesImportsInterestInvestment spending g.h.i.j.k.l. Private savingsProfitRentTaxesWages 4. Using the income method, GDP in the economy shown above would equal $__________ .5. Net exports equal $ __________ .Disposable income equals $ __________ . s.t.u. 6. How does the government shown in the circular flow diagram above finance its purchases of goodsand services (select all that apply)?v.a. Consumer spendingg. Private savingsb. Exportsh. Profitc. Government purchasesi. Rentd. Importsj. Taxese. Interestk. Wagesf. Investment spendingl.m.n.o. B. Would each of the following transactions be included in GDP for the United States? Why or whynot?p. Put yes or no in the first blank and the letter for the reason (from the choices given below) in thesecond blank for questions 7 – 12.q.a. It is consumptionc. It is a purely financiale. It is an export and isspending.transaction.added to GDP.b. It is investmentd. It was not produced thisf. It is an import and isspending.year.subtracted from GDP.r. s.t. 7. Coca-Cola builds a new bottling plant in the United States. (yes, no) __________ because__________ u.v. 8. Delta sells one of its existing airplanes to Korean Air. (yes, no) __________ because __________w.x. 9. Ms. Moneybags buys an existing share of Disney stock. (yes, no) __________ because__________y.z. 10. A California winery produces a bottle of Chardonnay and sells it to a customer in Montreal,Canada.aa.(yes, no) __________ because __________ab.ac. 11. An American buys a bottle of French perfume in Tulsa. (yes, no) __________ because __________ad.ae. 12. A book publisher produces too many copies of a new book; the books don’t sell this year, so thepublisheraf.adds the surplus books to inventories. (yes, no) __________ because __________ag.ah.ai.aj. C. The economy shown below produces three goods: computers, DVDs, and pizza. The table showsthe prices and output of the three goods for the years 2005, 2006, and 2007. Use 2005 as the baseyear.ak.al.am.an. Computersao. DVDsap. Pizzaaq. Year ar. Price ax. 2005be. 2006bl. 2007 ay. $900bf. 1,000bm.1,050 as. Quantityaz. 10bg. 10.5bn. 12 at. Priceba. $10bh. 12bo. 14 au. Quantitybb. 100bi. 105bp. 110 av. Pricebc. $15bj. 16bq. 17 aw. Quantitybd. 2bk. 2br. 3 bs.bt. Calculate nominal GDP in the economy for each of the three years. What is the percent change innominal GDP from 2005 to 2006 and from 2006 to 2007? Hint: Nominal GDP for a year is the value ofall goods produced during the current year at the current year’s prices.bu.bv. For questions 13 – 15 round your answer to the nearest whole number and use NO COMMAS.For example 11,000.64 would be entered as 11001bw.bx. 13. Nominal GDP in 2005 is $ __________.by.bz. 14. Nominal GDP in 2006 is $ __________.ca.cb. 15. Nominal GDP in 2007 is $ __________.cc.cd.ce. For questions 16 and 17 round your answer to one decimal point. For example 23.354 would beentered as 23.4. You will get an incorrect answer here if your answers for 13 – 15 are notcorrect, so you may want to check to make sure 13 – 15 are correct before continuing.cf.cg. 16. The percent change in nominal GDP from 2005 to 2006 is __________ percent.ch.ci. 17. The percent change in nominal GDP from 2006 to 2007 is __________ percent. cj.ck.cl. Calculate real GDP in the economy using 2005 (base year) prices for each of the three years. Whatis the percent change in real GDP from 2005 to 2006 and from 2006 to 2007? Compare these to thenominal values computed in 1 – 3.cm.cn. For questions 18 – 20 round your answer to the nearest whole number and use NO COMMAS.For example 11,000.64 would be entered as 11001co.cp. 18. Real GDP in 2005 is $ __________.cq.cr. 19. Real GDP in 2006 is $ __________.cs.ct. 20. Real GDP in 2007 is $ __________.cu.cv.cw.For questions 21 and 22 round your answer to one decimal point. For example 23.354 would beentered as 23.4cx.cy. 21. The percent change in real GDP from 2005 to 2006 is __________ percent.cz.da. 22. The percent change in real GDP from 2006 to 2007 is __________ percent.db.dc.dd. If the table represented a market basket for a CPI in an economy which actually has hundreds ofgoods what would the price index be for each of the three years? Calculate a price index for eachyear using 2005 as the base year.de.df. For questions 23 – 25 round your answer to one decimal point. (23.354 would be entered as23.4)dg.dh. 23. The price index in 2005 is __________.di.dj. 24. The price index in 2006 is __________.dk.dl. 25. The price index in 2007 is __________.dm.dn. Calculate real GDP for each of the three years using the answers you obtained in 13 – 15 and the priceindices obtained in 23 – 25. To get correct answers here you must have correct answers forquestions 13 – 15 and 23 – 25.do.dp.dq. For questions 26 – 28 round your answer to the nearest whole number and use NO COMMAS.For example 11,000.64 would be entered as 11001.dr.ds. 26. Real GDP in 2005 is $ __________.dt.du. 27. Real GDP in 2006 is $ __________.dv.dw. 28. Real GDP in 2007 is $ __________.dx.dy. Note: You should get similar answers for 18 – 20 and 26 – 28. They will differ by as much as $20 or sodue to rounding, but you should now appreciate how much easier it is to use a price index to convertnominal values to real values than to try and compute them the way you did in 18 – 20. This assumesthat someone else computes the actual indexes and provides you with them. In an economy with manythousands of goods and services (rather than 3) actually computing real values would be very difficult without price indexes. I think you can now appreciate why a representative market basket is used tocompute price indexes. It still includes a large number of goods and services but certainly a smallernumber than those actually in the economy.dz.ea.eb. D. The table below shows data on nominal GDP (in billions of dollars), real GDP (in billions of 2000dollars), and population (in thousands) of the United States in 1960, 1970, 1980, 1990, 2000, and 2008,years in which the U.S. price level consistently rose.ec.ed. Yearee. Nominaleg. Realei. Populatioek. Perel. PerGDPGDPnCapiCapief. (billionseh. (billionsej. (billions)tataofofNomRealdollars)dollars)inalGDPGDPer.em.en. 526.4eo. 2501.8ep. 0.181eq.13,8219602,908 es. 1970 et. 1038.5 eu. 3771.9 ev. 0.205 2 ex.ew. 18,400 5,066 fx.a.b.c.d.e.f.fy.fz. ey. 1980 ez. 2789.5 fa. 5161.7 fb. 0.227 fc. fe. 1990 ff. 5803.1 fg. 7112.5 fh. 0.249 fi. fk. 2000 fl. 9817.0 fm. 9817.0 fn. 0.281 fq. 2008 fr. 14280.7 fs. 11671.3 ft. 0.304 fd.12,289 22,739fj. 23,306 fo. 34,936fu. 46,976 28,564 fp. 34,936fv. 38,392 fw.29. Which year was the base year used in this time series? How do you know?196019701980199020002007Complete the table. Calculate per capita values for 2000 and 2008. Round your answers to thenearest whole number and use NO COMMAS. For example 11,000.64 would be entered as 11001 ga.gb.capita nominal GDP in 2000 was $ 34936gc.gd.capita real GDP in 2000 was $ 34936ge.gf.capita nominal GDP in 2008 was $ 46976gg.gh.capita real GDP in 2008 was $ 38392gi.gj. 30. Per31. Per32. Per33. Per gk. GDP can be adjusted for both price increases and population increases. To see the difference thatthese adjustments can have on the data calculate the percent changes requested below.gl.gm.Round your answers to one decimal point. For example 23.354 would be entered as 23.4gn.go. 34. The percent change in nominal GDP from 2000 to 2008 was __________ percent.gp.gq. 35. The percent change in per capita nominal GDP from 2000 to 2008 was __________ percent.gr.gs. 36. The percent change in real GDP from 2000 to 2008 was __________ percent.gt.gu. 37. The percent change in per capita real GDP from 2000 to 2008 was __________ percent.gv.gw.gx. E. Suppose you are planning on comparing GDP data over time or between countries to determine thelevel of prosperity each year or in each country. Were real or nominal values better indicators of actualchanges in prosperity? Does adjusting for population changes (using per capita measures) make themeasure a better or worse indicator?gy.gz. 38. Which of the four measures shown below would give the best measure of prosperity or quality oflife in a country at a given point in time?ha.a. nominal GDPhb.b. real GDPhc.c. per capita nominal GDPhd.d. per capita real GDPhe.hf.hg. 39. Which of the four measures shown below would give the worst measure of prosperity or quality oflife in a country at a given point in time?hh.a. nominal GDPhi.b. real GDPhj.c. per capita nominal GDPhk.d. per capita real GDPhl.hm.hn. 40. The inflation rate in any given year is equal to:ho.hp. a.hq.hr. b.hs.ht. c. nominal GDP? year 2?nominal GDP? year1nominal GDP? year 1real GDP? year 2?real GDP? year 1real GDP? year 1 x 100 x 100 price index? year 2? price index? year 1price index? year 1 x 100 hu.hv. d. all of the above would result in the same inflation ratehw.hx.