and profits received by households or total expenditures on goods and services by households,firms, government, and the rest of the world.44)Answer:TrueFalseDiff: 1Page Ref: 619-620/245-246Topic: Measuring Total ProductionLearning Outcome: Macro 3: Identify and interpret key macroeconomic measuresAACSB: Reflective Thinking45) Government spending on transfer payments is included in government purchases whencalculating GDP because it results in the production of new goods and services.45)Answer:TrueFalseDiff: 1Page Ref: 621/247Topic: Components of GDPLearning Outcome: Macro 3: Identify and interpret key macroeconomic measuresAACSB: Reflective ThinkingSHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.Table 19-2ProductQuantityPrice per UnitSteel1,000$100iPods5,000200Autos50025,000Legal services1002,00046)Refer to Table 19-2.Suppose that the above table represents the goods and servicesproduced in a very simple economy in 2011. Assume that steel is used as an input in theproduction of autos. Using that information, calculate GDP for the year 2011.46)Answer: First, we must decide which goods to include in the calculation of GDP. GDP isdefined as the money value of final goods and services produced. Since steel isincluded in the production of autos, it is an intermediate good, not a final good. Sosteel should be excluded from the calculation. Final goods and services are goodsand services consumed by the ultimate user of the good or service. All the othergoods and services in the table are considered final goods.Next, the money value of these final goods and services must be calculated. Themoney value is found by multiplying the price of the good or service times thequantity produced of that good or service. The total money value is found bysumming up the individual money values. Thus GDP for 2011=$200×5,000+$25,000×500+$2,000×100=$1,000,000+$ 12,500,000+200,000=$13,700,000.Diff: 2Page Ref: 621-622/247-248Topic: Measuring Total ProductionLearning Outcome: Macro 3: Identify and interpret key macroeconomic measuresAACSB: Analytic Skills11
47) Describe briefly how the final value of an iPhone must be equal to the sum of incomesgenerated by the production of the iPhone.47)Answer: Consider the value of an iPhone which costs $200. Part of the $200 goes to Apple inthe form of profit. Part of the $200 goes to the firms that sold Apple the parts thatmade up the iPhone. Part of the $200 goes to the workers that built the iPhone. Aportion of the $200 goes to pay the sales clerk who sells the iPhone. Part of the $200goes to the trucking company that shipped the iPhone. In fact, all of the value of the$200 ends up as income for someone in the economy. If we extend this idea to the
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