Chapter 23 Measuring A Nation's Income

Chapter 23 Measuring A Nation's Income - CHAPTER 23...

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CHAPTER 23 MEASURING A NATION'S INCOME 1) What components of GDP (if any) would each of the following transactions affect? Explain. a) A family buys a new refrigerator. (Consumption) b) Aunt Jane buys a new house. (Investment) c) Ford sells a Mustang from its inventory. d) California repaves a Highway 101. (Government purchases) e) You buy a pizza. (Consumption) f) Your parents buy a bottle of French wine. (Consumption) g) Honda expands its factory in Marysville, Ohio. (Investment) 2) The government purchases component of GDP does not include spending on transfer payments such as Social Security. Thinking about the definition of GDP, explain why transfer payments are excluded. Government purchases include spending on goods and services by local, state and federal government. It includes the salaries of government workers and spending on public works. But, such government spending is called a transfer payments because it is not made in exchange for a currently produced good or service. Transfer payments alter household income, however, it does not
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This note was uploaded on 01/10/2011 for the course BUS 101 taught by Professor Kara during the Spring '10 term at Baptist Americas.

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Chapter 23 Measuring A Nation's Income - CHAPTER 23...

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