Chat with AIExam 8: Measuring the Aggregate Economy
In economics it is important to know the distinction between flow concepts and stock concepts.Explain this distinction,and give examples of each.
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VerifiedA stock represents a quantity of something at a given point in time.An example is your bank balance.Your bank statement indicates a balance in your account,as of the date the statement was issued.This is your stock of money in that account at that moment in time.Another example of a stock concept is your current weight.A flow concept is associated not with a point in time,but with a time period.An example is your income.When a person states their income,it must be with reference to a time period to be meaningful.An income of $800 per week is very different from $800 per month.GDP and GNP are flow concepts.They are measures of aggregate output per year.
Why will calculating GDP using the expenditure approach give you the same value as using the income approach? What types of data would be needed for each approach?
(38) VerifiedBoth the income and expenditure approach to GDP calculation will give you the same value because the national income accounts were set up to make sure this would occur.The specific reason is known as the national income accounting identity (the equality of income and output in the national income accounts).All expenditures on goods and services are paid out to factor inputs.Thus,by definition,income = expenditures.To use the expenditures approach,GDP = C + I + G + (X - M),you need data on personal consumption,gross private investment,government purchases,exports,and imports.To use the income approach,you must first calculate national income,NI.For that,you need data on employee compensation,rents,interest,and profits (NI = employee compensation + rents + interest + profit).To get GNP,data on indirect taxes and depreciation are needed (GNP = NI + indirect taxes + depreciation).To get GDP,you need data on net foreign factor income (GDP = GNP - net foreign factor income)
Without national income accounting there would not be any macroeconomics.Evaluate this statement.
(33) VerifiedThis statement is valid.National income accounting provides us with the terminology (and the associated economic variables)needed to analyze the macro economy.Without these variables,we would have no way to measure/analyze/discuss the aggregate economy.
Determine the amount contributed to GDP from the sale of 200,000 copies of the CD by R.L.Burnside (on Fat Possum Records)entitled "Too Bad Jim" by filling in the table below.Base your answer on the following information:
R.L.receives $3 per CD in royalties.
Fat Possum sells each CD to wholesalers for $10.
Wholesalers sold the CD to retailers for an average price of $12 per CD.
Retailers sold 200,000 CDs to consumers for $15 per CD.
Demonstrate how the value-added approach equals the final sales approach.
Cost of Value of Participants Materials Sales Value Added R.L. Fat Possum Wholesalers Retailers Totals
(45) Purchases of stocks and bonds in economic terminology are not investment.Explain why this statement is true.
(44) Answer all of the following questions concerning GDP growth.
(a)Nominal GDP increases from $5 trillion to $5.5 trillion while the price level increases by 10%.Has real income increased?
(b)Nominal GDP increases from $6 trillion to $6.8 trillion while real GDP increases from $6 trillion to $6.2 trillion.What happened to the price level?
(c)Nominal GDP increases from $7 trillion to $8 trillion while real GDP increases from $7 trillion to $7.5 trillion.By what percent did real income change?
(31) What is the difference between Gross Domestic Product and Gross National Product? What is the difference between Gross Domestic Product (GDP)and Net Domestic Product (NDP)?
(36) In calculating GDP by the expenditure method,there are two ways to avoid the double counting of intermediate goods.Demonstrate your understanding of these two methods by showing how both produce the same calculation of contribution to GDP.Assume the following: 1)Iron ore is produced by iron mining,which is sold to steel makers for $30 million (we will make the simplifying assumption that iron mining uses no intermediate goods).2)The iron ore is all used to make steel,which is sold to automobile makers for $100 million.3)The steel is all used to make automobiles,which are sold to dealers for $250 million.4)All of the automobiles are sold by the dealers to consumers for $350 million.What are the two methods,and what contribution to GDP can be calculated by each method,from the above assumptions?
(35) Calculate the contribution to GDP that would be the result of each of the following transactions:
(a)The government purchases an airplane for $6 million.
(b)A citizen sells a used car for $6,000.
(c)A citizen sells a used car to a dealer for $6,000,who resells it to a consumer for $7,500.
(d)A citizen sells a bond for $1,000 that they bought last year for $600.
(e)The government issues a social security check for $1,250 (ignore the administrative costs of issuing the check).
(44) Which of the following transactions is considered a purchase of final output? Which one is considered the purchase of an intermediate good?
(a)Albert purchased a camera from the U.S.to use on his vacation in the Bahamas.
(b)Albert purchased a roll of film to use in his camera.
(c)An owner of a bakery purchased wheat to make bread.
(d)A chocolate factory purchased milk to make chocolate.
(e)The Ford Company purchased 10 tons of steel to make cars.
(f)Sue purchased cleaning detergent to use in her newly purchased washing machine.
(g)Karen bought tomato seeds and planted them in her backyard for her own use.
(36) Why might per capita GDP comparisons of living standards between countries be misleading? What do economists do to avoid some of the problems?
(30) Assume an economy produces just cars and computers; use the information in the table below to answer the following questions about the GDP.
Cars Camputers Year Quantity Price Quantity Price 2009 100 \ 10,000 1,000 \ 1,000 2010 110 \ 12,000 1,100 \ 900 (1)Calculate nominal GDP in 2009 and 2010.What is the growth rate in nominal GDP?
(2)Using 2009 as a base year,calculate real GDP in 2010.What is the growth rate in real GDP?
(3)Calculate the GDP deflator in 2010.
(32) Define real and nominal GDP and explain why the growth of real GDP is more important to society than the growth in nominal GDP?
(38) You've been given the following data:
Net non-business interest incame 27 Government purchases 600 Gros5 private investment 500 Depreciation 10 Net exgarts -50 Persanal consumption 2,500 Foreign factar incame eaned domestically 320 Income fom fareipn domestic factor saurces 300 On the basis of these data calculate GDP,NDP,and GNP.
(32) If real income has risen from $5 trillion to $5.3 trillion and the price level went up by 12%,by what dollar amount has nominal income risen?
(34) If nominal GDP grew at 4% per year over the past four years,can we be sure that everyone is better off now?
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