midterm1_13

D what would happen to the equilibrium quantity of

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Unformatted text preview: tity of snow blowers supplied and demanded: would it rise or fall? 2 3. Please indicate whether each of the following statements is true or false (circle one on the answer sheet): a. Gross Domestic Product (GDP) accounts for spending on physical goods, like apples, oranges, and big-­‐screen televisions, but not on services, like haircuts, music concerts, and legal advice, that are produced within an economy during a given period of time. b. GDP is a measure of both income and expenditure economy-­‐wide. c. GDP includes the value of both new and used cars purchased by consumers within an economy during a given period of time. d. If an American citizen produces goods and earns income while working abroad in Japan, the value of those goods gets counted in Japan’s GDP but not in US GDP. 4. The national income accounting identity breaks GDP (Y) down into four components – consumption (C), investment (I), government purchases (G), and net exports (NX) – according to Y = C + I + G + NX. To which of the four components, C, I, G, or NX would each of the following belong: a. A laptop computer, manufactured in the US and purchased by the Massachusetts State Government. b. A laptop computer, manufactured in the US and purchased by an American consumer. c. A laptop computer, manufactured in the US and purchased by an European consumer. d. A laptop computer, manufactured in the US and purchased by an American business. 5. Consider a simple economy in which only two goods are produced and sold: hot dogs and hamburgers. The prices and quantities produced of these two goods over a three-­‐year period are shown in the table below. Year Price of Quantity of Price of Quantity of Hot Dogs Hot Dogs Hamburgers Hamburgers 2010 $1 4 $2 3 2011 $2 5 $4 4 2012 $4 5 $5 5 a. Calculate nominal GDP in 2010, 2011, and 2012. b. Next, using 2010 as your base year, calculate real GDP in 2010, 2011, and 2012. c. Finally, calculate the GDP deflator for 2010, 2011, and 2012. 3 6. Go back to the same example from question 5, just above...
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