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Econ midterm 1 review

Econ midterm 1 review - Gross private domestic investments...

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Econ midterm 1 review Firms supply, Demand is downward sloping. Zero elasticity = inelastic, demand is vertical Elastic, demand is horizontal. And value of elasticity is infinity. What is GDP (gross domestic product)= total money value of final goods produced within a nation’s borders in a given period of time. Three methods to calculate GDP (Y): 3 approaches: Value added (GDP) = revenues (sales) of firms – cost of intermediate goods Final goods Income (GDP) = wages + indirect taxes + interest payments + depreciation + profits Depreciation= capital goods (machinery) that wear off. Final goods approach Y = CIGX-M(consumption + investments + government investment + exports – imports ) Or Y=CIG-NX Personal consumtion expenditures 6000 Indirect business taxes 300
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Unformatted text preview: Gross private domestic investments 1700 Imports 900 Profits/rents/interest 1500 Depreciation 600 Income taxes 1000 Employee compensation (wages) 6100 Gov’t purchases 1300 Exports 400 Y = CIGX-M = 6000 + 1700 + 1300 + 400 + 900 = 8500 Income = 6100 + 300 + 1500 + 600 = 8500 (wages, indirect taxes, profits, income taxes) 6) jane doe sells her home that was originally built in 1970 for 350,000. she has to pay 5% in fees to the real estate agent who arranged the sale. How much if any, of this transaction would be counted in GDP? Only the cost of the service will be counted to GDP. That’s because the house was produced in 1970. Timber should not be included because it’s an intermediate good....
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