1. A. For each of the following, state whether or not it is included in GDP. If it is, state the category or categories where included, explain why, and state what the total dollar effect on GDP is. If it is not included in GDP, explain why not. (i) In 2022, Joe Smith bought stock in Netflix for $300,000 paying his broker $3,000. In 2023, he sells this stock for $400,000, paying his broker $4,000. In 2023, he uses $100,000 of his earnings to buy a Tesla made in California and the broker uses $3,000 of the amount she earned to buy a new stove that was made in Korea. (Explain the effects for both 2022 and 2023.) (ii) In 2022, an American company that makes men's suits in Massachusetts produces $800,000 suits, selling $600,000 of them to U.S. customers and exporting $200,000 to Canada. To produce the suits, the company imported $100,000 of cloth from China, bought $20,000 buttons from an American company in Texas, and bought $60,000 in new sewing machines produced by a company in California. (iii) In 2021, some of the components of Biden's American Rescue Plan included: $246 billion increased unemployment benefits; $143 billion child and earned income tax cuts; $123 billion spent on vaccines, medical supplies and testing related to Covid-19, and $130 billion for schools to pay for safety measures to reopen. Households receiving the unemployment benefits and tax cuts spent $300 billion on food and clothing produced in the U.S. and saved $89 billion in the same year, 2021.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Measuring A Nation's Income

Section: Chapter Questions

Problem 6PA

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Question

I need help with both !

1. A. For each of the following, state whether or not it is included in GDP. If it is, state the category or categories
where included, explain why, and state what the total dollar effect on GDP is. If it is not included in GDP, explain
why not.
(i) In 2022, Joe Smith bought stock in Netflix for $300,000 paying his broker $3,000. In 2023, he sells this stock
for $400,000, paying his broker $4,000. In 2023, he uses $100,000 of his earnings to buy a Tesla made in
California and the broker uses $3,000 of the amount she earned to buy a new stove that was made in Korea.
(Explain the effects for both 2022 and 2023.)
(ii) In 2022, an American company that makes men's suits in Massachusetts produces $800,000 suits, selling
$600,000 of them to U.S. customers and exporting $200,000 to Canada. To produce the suits, the company
imported $100,000 of cloth from China, bought $20,000 buttons from an American company in Texas, and bought
$60,000 in new sewing machines produced by a company in California.
(iii) In 2021, some of the components of Biden's American Rescue Plan included: $246 billion increased
unemployment benefits; $143 billion child and earned income tax cuts; $123 billion spent on vaccines, medical
supplies and testing related to Covid-19, and $130 billion for schools to pay for safety measures to reopen.
Households receiving the unemployment benefits and tax cuts spent $300 billion on food and clothing produced in
the U.S. and saved $89 billion in the same year, 2021.

Question 1 continued:
1. B
CPI
Wage
Nominal interest rate
15,000
9,000
Number Unemployed
Number Employed
Population
150,000 144,000
225,000 225,000
Given the information above, calculate (show your work - carry to two decimal points):
(i). Inflation rate
(ii). Real wage for each year 2021
2022
(iv) Are you better off? Why or why not?
(iii) Growth of real wage - calculate it two ways: exact with deflating
approximation
(v) Real interest rate between the two years
calculate it two ways: exact with deflating
approximation_
(vi) Would lenders be happy with this? Why or why not?
(vii) Unemployment rate: 2021
2022
(viii) Participation rate :
(ix) Employment rate:
2021
2021
2022
2021
2022
500
80,000
2%
2022
520
88,000
2%
(x) If the unemployment rate falls, can we conclude that conditions in the labor market have improved for workers?

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Introduction

Gross Domestic Product (GDP) is a measure of the total value of goods and services produced within a country's borders in a given period of time, usually a year or a quarter. It represents the economic output of a country and is often used as an indicator of the overall health of the economy. GDP can be calculated in three ways: through the expenditure approach, which measures the total spending on final goods and services in the economy; through the income approach, which measures the total income earned by households and businesses in the economy; and through the production approach, which measures the total value of goods and services produced in the economy. GDP can also be adjusted for inflation to obtain real GDP, which provides a more accurate measure of economic growth by accounting for changes in the price level over time.