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Unformatted text preview: 1. Which contributes more to GDP the production of an economy car or the production of a luxury car? Why? The production of a luxury car contributes more to GDP than the production of an economy car because the luxury car has a higher market value. 2. A farmer sells wheat to a baker for $2. The baker uses the wheat to make bread, which is sold for $3. What is the total contribution of these transactions to GDP? The contribution to GDP is $3 , the market value of the bread, which is the final good that is sold. 3. Many years ago, Peggy paid $500 to put together a record collection. Today, she sold her albums at a garage sale for $100. How does this sale affect current GDP? The sale of used records does not affect GDP at all because it involves no current production 4. Using the national spending approach to GDP, which components of GDP (if any) would each of the following transactions affect? Explain. a. A family buys a new dishwasher Co nsumption increases because the dishwasher is a good purchased by a household....
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This note was uploaded on 06/20/2011 for the course ECON 211 taught by Professor Morrison during the Spring '10 term at Wayne State University.
- Spring '10