EC141 Final Study .docx - EC141 Final Study 1 Which of the following are included in this year\u2019s GDP Explain your answer in each case a An auto

EC141 Final Study .docx - EC141 Final Study 1 Which of the...

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EC141 Final Study 1. Which of the following are included in this year’s GDP? Explain your answer in each case. a. An auto dealer’s sale of a new car to a non-business customer. b. The services of a commercial painter in painting the family home. c. The money received by Smith when she sells her biology textbook to a used-book buyer. d. A $2 billion increase in business inventories. e. The publication and sale of a new economics textbook. f. Government purchases of newly produced aircraft. MY ANSWER: 30/30 was received for my answer a. An auto dealer’s sale of a new car to a non-business customer. Included: a final product was sold to a household b. The services of a commercial painter in painting the family home. Excluded; the services of a commercial painter in painting the family home is not included c. The money received by Smith when she sells her biology textbook to a used-book buyer. Excluded, the book already was sold before and considered in GDP, white it was new. Secondhand sales aren’t considered. d. A $2 billion increase in business inventories. Included. Represents production that occurred throughout the year e. The publication and sale of a new economics textbook. Included. First sale of a final product to a household f. Government purchases of newly produced aircraft. Included. A final product by the government was purchased PROFESSOR’S ANSWER a. Included: an auto dealer’s sale of a new car to a non-business customer is a final good sale. b. Excluded: the services of a commercial painter in painting the family home is not included. c. Excluded: the money received by Smith when she sells her biology textbook to a used-book buyer is a secondhand sale. d. Included: a $2 billion increase in business inventories is part of GDP. e. Included: the publication and sale of a new economics textbook is a final good sale.
f. Included: government purchases of newly produced aircraft is a final good sale. 2. What are the three basic functions of money? Describe how rapid inflation can undermine money’s ability to perform each of the three functions.

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