PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 5, Problem 2RQ
To determine
The
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You are discussing economic growth and the economic cycle with a group of colleagues in an effort to forecast the growth in an economy that is demonstrating an increase in investment, rising employment, and growing business confidence with slowly rising prices. Your discussion has encompassed the distinction between GDP and GNP and the importance of leading indicators for forecasting purposes. Based on this information, answer the following three questions. In national income accounting, what is the difference between gross domestic product (GDP) and gross national product (GNP)?
GNP equals GDP plus domestic production/earnings by foreign companies/citizens ,minus foreign production/earnings by domestic companies/citizens
GNP equals GDP plus foreign production/earnings by domestic companies/citizens, minus domestic production/earnings by foreign companies/citizens GNP equals GDP plus imports minus exports GNP equals GDP minus government spending minus exports plus imports.
A simple economy produces two goods, Apple Pies and Software. Price and quantity data are as follows:
In Year 2, nominal GDP is equal to: $ and real GDP is $
Production and Prices in Year 1 (Base year)
Quantity
105
550
Product
Apple Pies
Software
Price Per Unit
Production and Prices in Year 2
Quantity
131.25
825.00
Product
Apple Pies
Software
$2.00
$50.00
Price Per Unit
(enter both responses rounded to the nearest penny).
$3.00
$100.00
Although they are within legal limits,
Company X's operations are causing toxins to
build up in the wetlands adjacent to its
property. The harm done to the environment
is
included in GDP as part of statistical
discrepancy
excluded from GDP because the toxin is an
intermediate product
included in GDP because the company will at
some point have to pay the cost of cleanup
excluded from GDP because it is not part of a
market transaction
included in GDP because there is a real cost
to cleaning up the toxins
Chapter 5 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Q2: GDP is: a) a measure of all spending in the economy on foreign and domestic goods and services. b) the total market value of all final goods and services produced in an economy in a given year. c) the value of all output produced within an economy. d) made up of three components: consumption, investment, and government expenditure.arrow_forwardAn analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?arrow_forwardIn May 2013, the value of the Consumer Price Index (CPI) in a certain country, Polonia, reached an all-time high of 228 index points and per capita nominal GDP was $48 comma 500. In January 1950, the CPI was at its lowest at 46 index points. Per capita nominal GDP in 1950 was $8 comma 000. Calculate real GDP per capita for 1950 by converting that year's nominal GDP per capita into current (2013) dollars. For 1950, real GDP per capita (in 2013 dollars) wasarrow_forward
- A simple economy produces two goods, Pumpkin Pies and Computer Games. Price and quantity data are as follows: Production and Prices in Year 1 (Base year) Product Quantity Price Per Unit Pumpkin Pies Computer Games 125 $1.00 750 $40.00 Production and Prices in Year 2 Product Quantity Price Per Unit Pumpkin Pies Computer Games 156.25 $1.50 1,125.00 $80.00 In Year 2, nominal GDP is equal to: $ and real GDP is $ (enter both responses rounded to the nearest penny).arrow_forward(3)Consider a stylized three-commodity economy that produces haircuts, hamburgers and DVDS. The quantities produced of each commodity and their market prices over three different years are presented below. Use the information and determine for each year (1999 = Base year) %3D (i)Nominal GDP (ii)Real GDP (iii)CPI (iv)GDP deflator PRODUCT. Q1 P1 (1999) Q2 P2 (2013) Q3 P3 (2014) Haircuts $10.00 3 $11.00 2 $16.20 Hamburgers 10 2.00 15 2.45 20 2.40 DVDS 15.00 8 15.00 10 14.00arrow_forwardGDP deflator (GDP deflator for year t = nominal GDP for year t divided by the real GDP for year t) is a price index representing the overall price level in the economy. The CPI (the consumer price index) is also a price index representing the overall price level in the economy. Which of the below is best explains why they are different? The GDP deflator does not reflect the prices of exported goods and services, whereas the consumer price index does not reflect the prices of the imported goods and services. The GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. The GDP deflator reflects the prices of intermediate goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.arrow_forward
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