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KnowlesElizabeth_Chapter2Problems281

# KnowlesElizabeth_Chapter2Problems281 - Elizabeth Knowles...

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Elizabeth Knowles Week 1 Chapter 2 Chapter 2 Problem 2 Page 53 & 54 A. Nominal GDP is the total value of goods and services in current prices. Therefore, for year one the nominal GDP is \$574,000. For year two, the nominal GDP is \$608,000. Year One 20,000*0.25+700*800+6,000*1.5 5,000+560,000+9,000 574,000 Year Two 30,000*.3+650*900+7,000*2 9,000+585,000+14,000 608,000 B. Nominal GDP increased by 5.9 percent between year one and year two. 608000-574000/574000=0.0592 *100=5.92 C. Real GDP is the inflation adjusted value of GDP, measured in constant prices. The question says that the prices in year one are the actual value of the products.Therefore, for year one the real GDP is also \$574,000 (see calculation above). For year two, the real GDP is \$538,000. Year Two 30,000*.25+650*800+7,000*1.50 7500+520,000+10,500 538,000 D.The real GDP has decreased about 6.3 percent from year one to year two. 538000-574000/574000=-0.0627 *100=6.27

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Elizabeth Knowles Week 1 Chapter 2 8. INCOME TOTAL SPENDING SALES TAX SALES TAX % of INCOME 10,000 10,000 1,000 0.1 20,000 18.000 1,800 0.09 50,000 35,000 3,500 0.07 100,000 60,000 6,000 0.06 B) The sales tax is regressive, because the poorer people end up paying more taxes, because they spend more of their income.
Elizabeth Knowles Week 1
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