For each of the following transactions determine the

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4.) For each of the following transactions, determine the contribution to the current year’s GDP. Explain the effects on the product, income, and expenditure accounts. a.) On January 1, you purchase 10 gallons of gasoline at $2.80 per gallon. The gas station purchased the gasoline the previous week at a wholesale price (transportation included) of $2.60 per gallon.
b.) Colonel Hogwash purchases a Civil War–era mansion for $1,000,000. The broker’s fee is 6%.
c.) A homemaker enters the workforce, taking a job that will pay $40,000 over the year. The home- maker must pay $16,000 over the year for professional child care services.
ECF2331: Macroeconomic and monetary policy Semester 1, 2018 able to work. But in practice there is no way to separate such intermediate services from final services, so they are all added to GDP. Expenditure approach: $56,000 ($16,000 consumption spending on child care services plus $40,000 in categories that depend on what the homemaker spends his or her income). Income approach: $56,000 ($40,000 compensation of homemaker plus $16,000 income to the factors producing the child care: employees’ wages, interest, taxes, profits). d.) A Japanese company builds an auto plant in Tennessee for $100,000,000, using only local labor and materials. (Hint: The auto plant is a capital good produced by Americans and purchased by the Japanese.)
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