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Brief Sample Exam#2 with answers

Brief Sample Exam#2 with answers - Brief Sample For...

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Brief Sample For questions 1-7 identify whether the transaction gets counted in the 2006 US GDP and in which of the major sub-accounts. Select your answer from the list below: a) does not count in the GDP b) is accounted in consumption spending c) is accounted in private business inventories d) is accounted in fixed non-residential investment e) is accounted in government spending f) is accounted in exports g) is accounted in imports h) is accounted in residential investment 1) The value of your tuition payment for our ECO 101 course B – this is a final service and the student is the consumer of this service, hence the value of your tuition is included in the GDP, under Consumption, Services category 2) Construction of the new Business College building on our campus (for simplicity, assume that the construction project is completed this year). D – the building represents productive capital, and the value of the building should be included in the GDP under Investment, in the non-residential fixed investment (structures). Note, most economists perceive this aspect of investment (non- residential structures) as something of a leading indicator for future economic growth/employment. The construction of the building generates construction jobs in the short-run, but most importantly, it generates employment in the long-run as the office space will be occupied by workers in the future. 3) The purchase of a new car assembled in the US this year B – Consumption spending. As long as that purchase is made by a consumer. This will be counted in Consumption, durable goods. 4) The purchase of a used car A – the value of the car should not be counted in the current GDP as the transaction has already been counted in the time period when the car was manufactured. Note two important points: 1) Even if the car was manufactured this year, but is now resold by one consumer to another, that transaction is not counted, as the value of the car was already accounted for at the time of the original transaction. For example, I purchase a new 2006 car in March and then in November sell this car to you, the original transaction was counted in March and the value of the car sold to me was included in the first quarter’s GDP, but the resale of the car to you does not get counted in the GDP as there is no production taking place. Recall that the GDP tracks production, and the second transaction is merely a transfer of ownership from me to you, while the first transaction was a consumer induced production of new output. 2) Second point. If the used car is sold to you by a dealer, whatever commission the dealer makes from this resale will be counted in the GDP in the
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consumption spending under the services, as the used car dealer produced a service to the consumer.
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Brief Sample Exam#2 with answers - Brief Sample For...

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