Chat with AIExam 6: Measuring National Output and National Income
Explain what net exports are and why they are included in the definition of GDP.
(35) 
VerifiedNet exports are the difference between exports (sales of U.S. - produced goods and services to foreigners) minus imports (purchase of foreign-made goods and services by the U.S.). The reason it is included in the definition of GDP is straightforward. Consumption, gross investment and government spending include spending on goods produced at home and abroad. That means that if we stop here we have an overstatement of GDP if we do not subtract imports. Similarly, those same expenditure components do not include goods that were produced here but not sold here. Therefore, we must add in exports so that the GDP figures do not understate production.
What are the three types of personal consumption expenditures? Explain and give an example of each.
(32) VerifiedThe three types of personal consumption expenditures are durable goods, nondurable goods and services. Durable goods are goods that last a relatively long time like automobiles and furniture. Nondurable goods are goods that are used up fairly quickly like food and clothing. Services are expenditures for things that do not involve physical production like legal services and universities.
Table 6. 1
-Using Table 6.1 calculate the percentage increase in Real GDP from 1987 to 1988 using 1987 as the base year.
Table 6. 1
-Using Table 6.1 calculate the percentage increase in Real GDP from 1987 to 1988 using 1987 as the base year.
(38) VerifiedThe increase in real GDP from 1987 to 1988 is equal to ($26-$21)/$21 * 100% = 23.8%
The Bahamas is a group of islands whose economy relies heavily on tourism. The majority of the hotels and resorts in the islands are owned by foreign countries. Which do you think is larger, Bahamas' GDP or GNP? Explain why.
(36) Explain why we must take into account changes in business inventories when calculating GDP.
(37) How are transfer payments reconciled in the national income and personal income accounts? Explain your reasoning.
(37) Explain the relationship among gross investment, net investment, and depreciation.
(32) An automobile dealer purchases additional vehicles at the end of 1999 in anticipation of increased sales in January of 2000. How are these vehicles reconciled in the GDP accounts?
(42) Why is a purely financial transaction not necessarily counted as part of gross domestic product?
(28) Assume that GDP is $9 Trillion, receipts of factor income from the rest of the world are $2 Trillion, and payments of factor income to the rest of the world are $1 Trillion. Calculate GNP from this information.
(40) Refer to the information provided in Table 6.4 below to answer the questions that follow.
-Answer Parts (a) through (g) using the information in Table 6.4 describing the Macrovian economy. Quantities are given in millions of Macrovian dollars (M$).
(a) Calculate gross private investment.
(b) Calculate Macrovian GDP.
(c) Calculate gross national product (GNP).
(d) Calculate net national product (NNP).
(e) Calculate national income.
(f) Calculate personal income.
(g) Calculate disposable personal income.
-Answer Parts (a) through (g) using the information in Table 6.4 describing the Macrovian economy. Quantities are given in millions of Macrovian dollars (M$).
(a) Calculate gross private investment.
(b) Calculate Macrovian GDP.
(c) Calculate gross national product (GNP).
(d) Calculate net national product (NNP).
(e) Calculate national income.
(f) Calculate personal income.
(g) Calculate disposable personal income.
(39) Explain what is meant by the concept of "value added" and how it can be used to calculate GDP.
(29) Explain in broad terms what the Bureau of Economic Analysis did to correct for the sensitivity of the choice of base years when calculating the percentage increase in Real GDP across time.
(38) Explain how using GDP may not be a very good measure of overall social welfare.
(32) If real GDP and nominal GDP both rise by 10% and 15% respectively from one year to the next what can we say is true about production and inflation between these two years and why?
(32)
Table 6. 1
-Using Table 6.1 calculate real GDP for 1988 using 1987 as the base year.
Table 6. 1
-Using Table 6.1 calculate real GDP for 1988 using 1987 as the base year.
(46) Explain why real GDP may fall even when the prices of large number of goods in the economy have increased enormously.
(39) 
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