The annual output and prices of a 3-good economy are shown in the table below.
year 1 year 2
Quarts of ice cream $5 - 4 $5 - 6
Bottles of shampoo $3 - 2 $3 - 3
Jars of peanut butter $2 - 4 $2 - 3
a) What was GDP in year 1?
b) What was GDP in year 2?
answer
a) $34 (= (5*4) + (3*2) + (2*4))
b) $45 (= (5*6) + (3*3) + (2*3))
question
Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for $70,000. The retailer, in turn, brings in $160,000 from selling the bulbs directly to final customers.
What amount would these two transactions add to personal consumption expenditures and thus to GDP during the year?
answer
$160,000
=retailer's income + grower's income
(160,000-70,000)+70,000 = 160,000
question
Personal consumption expenditures 80
Purchases of stocks and bonds 30
Net exports -10
Government purchases 30
Sales of secondhand items 8
Gross investment 25
What is the country's GDP for the year
answer
$125 billion
= personal consumption + gross investment + government purchases + net exports
( 80 + 25 + 30 + (-10) ) = 125
NOTE: purchase of stocks and bonds and the sale of secondhand items are nor part of GDP
question
Compensation of employees 159.2
U.S. exports of goods and services 18.8
Consumption of fixed capital 11.8
Government purchases 59.4
Taxes on production and imports 14.4
Net private domestic investment 52.1
Transfer payments 13.9
U.S. imports of goods and services 16.5
Person taxes 40.5
Net foreign factor income 2.2
Personal consumption expenditures 219.1
Statistical discrepancy 0.0
a) GDP =
b) NDP =
c) NI =
answer
a) $344.7 billion = (personal consumption expenditures) + (net private domestic investment) + (consumption of fixed capital) + (government purchases) + (U.S. exports of goods and services) - (U.S. imports of goods and services)
b) $332.9 billion = (GDP) - (consumption of fixed capital)
c) $335.1 billion = (NDP) + (net foreign income) - (statistical discrepancy)
question
year Nominal GDP Price Index
1968 909.8 22.01
1978 2,293.8 40.40
1988 5,100.4 66.98
1998 8,793.5 85.51
2008 14,441.4 108.48
a) real GDP 1968
b) real GDP 1979
c) real GDP 1988
d) real GDP 1998
e) real GDP 2008
answer
a) $4,133.58 inflating
b) $5,677.72 inflating
c) $7,614.81 inflating
d) $10,283.59 inflating
e) $13,312.5 deflating
= (nominal GDP / (price index / 100))
question
Net exports 50
Underground economy 95
Personal consumption expenditures 300
Services of stay-at-home parents 45
Gross domestic investment 100
Government purchases 100
Total 690
a) What is the GDP?
b) What is the size of the underground economy as a percentage of GDP?
c) By what percentage would GDP be boosted if the value of the services of stay-at-home spouses were included in GDP?
