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hw1 ak - Sonoma State University ECONOMICS 304 Department...

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Sonoma State University ECONOMICS 304 Department of Economics Florence Bouvet Assignment 1-Answer Key –Chapter 2 Due in class on , before the lecture starts 1) By how much does GDP rise in each of the following scenarios? Explain a) A computer company buys parts from a local distributor for $1 million, assembles the parts, and sells the resulting computers for $2 million. GDP rises by $2 million (price of the final goods) b) a real estate agent sells a house for $200,000 that the previous owners had bought ten years earlier for $100,000. The agent earns a commission of $6000. GDP rises by the $6,000 commission (service provided by the real estate agent). Capital gains (here the increase in the value of the house) are not part of GDP since the capital was not produced that year. c ) During a recession, the government raises unemployment benefits by $100 million no impact on GDP because this is a transfer payment, not a government purchase of goods or services.
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