answerstopracticequestions3spring2004

answerstopracticequestions3spring2004 - Economics 102...

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Economics 102 Spring 2004 Answers to Practice Questions 3 1. a. The plumber’s wage is part of GDP as it is a payment for a final service. b. The price of the fixtures is included in GDP since they are a final good. The value of installation is not included as there is no payment made to the plumber. c. The cost of the wood is not included in GDP as it is an intermediate good. d. Only the cost of the new house would be part of GDP. e. The guitar’s original price was included in 1965’s GDP. The sale contributes nothing to current GDP. f. Yamaha is a Japanese company that does not produce goods in the U.S. Thus, if the keyboard is purchased directly from Yamaha there is no contribution from the sale. If it is purchased domestically, then the profit the music store makes on the sale and any commission earned from the sale is included. g. IBM has not issued any stock this year. Sales of stock are included only in GDP if it is a new offering. h. Gambling winnings are just a transfer between people and are not included in GDP. i. The price of the new car may be included in GDP if the car is produced in the U.S. See f. for more details. The sales price of a used car is not included. j. Since there is no transaction, there is no contribution to GDP. k.
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answerstopracticequestions3spring2004 - Economics 102...

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