hw1m11 - Homework 1 Principles of Macroeconomics: ECO 212...

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Homework 1 Principles of Macroeconomics: ECO 212 Due: Wednesday, May 25, 2011 Question 1 (20 points). For each of the following, calculate the addition to the GDP ( if any ). Also give a one sentence explanation of your reasoning. a. Dave cooks a bowl of his famous lentil soup for dinner, which all agree is better than the lentil soup at Chartwells, which sells for $2 per bowl. b. Deana buys a Starbuck’s cookie for $1.99 plus a 14 cent sales tax. c. Luca spends $10,000 on various car accessories. His Cadillac increases in value from $5,000 to $20,000. d. UM hires a Russian economist to teach an economics course at UM, and pays him $5000. Students pay a total of $11,000 for the course. e. Lucky jeans buys $200 in Denim from China, and makes two pairs of jeans, which it sells to Nordstroms for $125 each. Nordstrom sells 1 pair of jeans for $150. The other pair remains on the shelf. Question 2 (30 points). Calculate the macroeconomic statistics listed below for the economy “Pearson Dorm” de-
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hw1m11 - Homework 1 Principles of Macroeconomics: ECO 212...

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