Measuring the Production, Income, and Spending of Nations

Transcription

1 MACRO CHAPTER 6 (ECONOMICS 18) Measuring the Production, Income, and Spending of Nations PARALLEL PROBLEMS 1 1. Determine whether each of the following would be included in GDP, and explain why or why not. a. You buy a used car from a friend. b. You buy a used car at the local dealership. c. You are an at-home parent and spend your day cleaning house, cooking meals, and caring for the children. d. You hire a nanny to clean your house, cook your meals, and care for your children Determine in which spending category, if any, each of the following transactions would be recorded. a. Ford sells a Thunderbird from its inventory. b. Ford sells a Thunderbird that it produced this year to the state government. c. The city of Dallas purchases computer paper for its employees from a local firm. d. A business in Dallas purchases computer paper for its employees from a local firm. e. Your grandmother wins $10 million in the lottery. f. You purchase a newly-constructed house. Topic: the underground economy 3 3. Suppose that in response to a new government policy, some businesses are forced to go underground. a. How will this affect the measure of GDP? b. Will this change in GDP reflect a change in well-being?

2 Topic: prices as weights 4 4. Examine the following data for a hypothetical centrally-planned economy that subsequently frees prices: Good Quantity Controlled Price Market Price Higher 200 $1,000 $3,000 Education Cereal 10,000 $5 $1 a. Assume that higher education and cereal are the only goods and services produced in this economy. Calculate GDP under the controlled prices and under market prices, assuming the quantities do not change. Did government-set prices result in an under- or over-valuation of production on the whole? b. How do people value each good in relation to previously controlled prices? Topic: inventory 5 5. Consider the following two scenarios for monthly inventories and sales for a company producing cereal. In both scenarios, the company s sales are the same. Month Scenario A Start-of the-month inventory stock Production Sales Jun Jul Aug Sep Oct Inventory Scenario B Month Start-of the-month inventory stock Production Sales Jun Jul Aug Sep Oct Inventory In Scenario A, the company maintains production at a constant level.

3 In Scenario B, the company adjusts production from month to month to try to match sales. a. Calculate the inventory in each month and resulting stock of inventory at the beginning of the following month for both scenarios. b. How does maintaining constant production affect the stock of inventory? Explain Given the information in the table below for three consecutive years in the U.S. economy, calculate the missing data. Nominal GDP Real GDP GDP Inflation (percent Real GDP (in billions (in billions Deflator change in per Capita Populatio Year of U.S. of 1992 (1992 = 100) GDP deflator) (in 1992 n (in millions) , , , Topic: nominal and real GDP 7 7. Suppose there are only three goods in an economy: Year Good Price Quantity 1999 Tomatoes $3/lb 1000 lbs Squash $1/lb 600 lbs Telephones $ Tomatoes $4.50/lb 900 lbs Squash $2/lb 700 lbs Telephones $ a. Calculate for 1999 and b. Calculate the percentage change in GDP from 1999 to 2000 using 1999 prices and 2000 prices. c. Calculate the percentage change in real GDP from 1999 to 2000 using your answer from (b). d. What is the GDP deflator for 2000 if it is equal to 1.0 in 1999?

4 Topic: value added and the income approach 8 8. Use the following data for an ice-cream vendor at a local fair: Revenue: $1,800 Costs: Wages and salaries $350 Concession stand fee $300 Rental fee for truck $100 Ice cream $850 a. Calculate the vendor's value added. b. Profits are revenue minus costs. Capital income consists of profits, rents, and interest. Show that the value added equals capital income plus labor income paid by the vendor. c. Suppose that at a similar fair, the temperature is cooler, and revenues fall to $1,500, but the prices of intermediate inputs, rental fees, and wages and salaries do not change. What happens to value added and profits in this case? Topic: the budget and trade deficits 9 9. Suppose in the United States was about $130 billion and the trade deficit was $10 billion. How much was national saving in the United States? If the government budget surplus was $2 billion, how much total saving by consumers and businesses in the United States occurred? Topic: saving,, and net exports Suppose the following data explain the economic activity in a country in the year Component of Spending Value in billions of dollars Consumption 174 Business fixed and residential 40 Inventory stock at the end of Inventory stock at the end of Depreciation 18 Government outlays 90 Government purchases 75 Total government tax receipts 100 Exports 21 Imports 30 Labor income 150 Capital Income 90 Net income of foreigners 10 Sales taxes 30

5 Given these data, calculate the following: a. Inventory b. Net exports c. Gross domestic product d. Statistical discrepancy e. National saving f. Government saving g.verify that national saving equals plus net exports.