ps1 - Economics 202 Principles of Macroeconomics Name: _...

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Economics 202 Name: __________________________ Principles of Macroeconomics Professor Melick Problem Set #1 Due Wednesday January 23, 2008 As a sort of warm-up, it will be instructive to get a sense of the magnitude and composition of U.S. Gross Domestic Product (GDP). The Bureau of Economic Analysis (BEA), in the Department of Commerce, calculates GDP on a quarterly basis. About one month after a quarter ends, BEA uses what data is available to issue the advance estimate for GDP. For example, on October 31, 2007 BEA released the advance estimate for GDP for the third quarter of 2007. As more information becomes available, the advance estimate is revised. On November 29, 2007 the BEA released the preliminary estimate of GDP for the third quarter of 2007. Last, but not least, on December 20, 2007 the BEA released the final estimate of GDP for the third quarter of 2007. This whole cycle starts again on January 31, 2008, when BEA releases the advance estimate of GDP for the fourth quarter of 2007. For complete data, we must wait for the final release. At this point in time, the final estimate of GDP for the third quarter of 2007 is available. The data is published in the government periodical Survey of Current Business and all of the detail on GDP is found in a series of tables in the Survey of Current Business called the National Income and Product Accounts (NIPA, pronounced nip uh). These tables are also available on the BEA's web site at http://www.bea.gov/ . From this page select Gross Domestic Product and then choose Interactive NIPA Tables . I. Expenditure Approach 1. Using data for the third quarter of 2007 from Table 1.1.5 of the NIPA accounts, fill in the following table. Item Symbol Amount - 2007 Q III (Billions of Dollars) Final Estimate Percentage of GDP BONUS !!!!!!! Amount - 2007 Q III (Billions of Dollars) From the Oct. 31 Advance Press Release Personal Consumption Expenditure C Gross Private Domestic Investment I Net Exports of Goods and Services NX Government Consumption Expenditures and Gross Investment G Gross Domestic Product Y 2. Comment on any large differences between this updated table and Table 2.1 in Abel and Bernanke.
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II. Income Approach The circular flow model tells us that spending in the product markets (the expenditure approach) should match spending in the factor markets (the income approach). However, there are three main distortions that keep the two types of spending from equaling each other. Pages 35-36 of Abel and Bernanke explain these distortions. First, the presence of taxes and subsidies drives a wedge between what the consumer pays (the expenditure
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This note was uploaded on 05/13/2010 for the course ECON 323 taught by Professor Jakes during the Spring '10 term at Alcorn State.

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ps1 - Economics 202 Principles of Macroeconomics Name: _...

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