problem_set_1 - Spring 2008 Professor Subhashini...

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Spring 2008 Professor Subhashini Muthukrishnan Department of Economics, Santa Clara University Nick Poggetti Economics 2 Problem Set 1 This problem set is an application of measuring the production, income and spending of nations. 1. Which spending categories of GDP (if any) would each of the following transactions affect? Explain. a) A family buys a new refrigerator. It falls under consumption spending as a durable good, because it is just that durable and is not a frequently purchased item. b) Aunt Jane buys a new house. Would fall under investment spending, as a residential investment because she is buying a house and therefore is making a long term residential investment. c) Ford sells a Mustang from its inventory. This would fall under the “Change in Business Inventories” category under investment spending. To prove this you could look at the inventory before the sale and the inventory after and see a clear change.
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This note was uploaded on 02/13/2012 for the course ECON 2 taught by Professor Staff during the Fall '10 term at Santa Clara.

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problem_set_1 - Spring 2008 Professor Subhashini...

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