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M o nspuitiaseu uy General Motors assembly plant 13. Suppose Nucor Steel sells $2,000 worth of steel to Ford. Other producers sell $5,000 worth of other inputs to Ford: Ford uses steel and other inputs to make a Taurus. It sells the Taurus to the car dealership for $15,000. The car dealership sells it to you for $18,000. What is the total contribution to GDP made by this series of transactions? 14. Which of the following is/are included into the income measure of the US GDP? a. profits of Randy the Illegal Drug-Dealer b. salary of Jane, a US citizen accountant working in Korea ue of a new garage Sam the School Teacher built himself in his back yard d. amount of a cash gift an ESC student receives from parents e salary of Maria, a citizen of Mexico, working legally at a dental office in Queens 15. US GDP can be found by: a. Adding up all the spending on US-produced goods and services by business, government, households and foreigners, and subtracting imports. b. Adding up the value of all final goods produced in the economy. c. Adding up all of the income receipts of households, government, and business. d. Summing up all the value-added at each stage of production e. Any of the above 16. GDP excludes these 2 items (circle two): a) services c) unpaid work in the home b) nondurable goods d) residential housing construction e) used automobiles 1) business travel and entertainment d. total nominal GDP 17. A good measure of the standard of a country's living over time is a. real GDP per capita. b. nominal GDP per capita. c. total real GDP. 18. GDP in an economy is $5.1 billion. Consumer expenditures are $3.2 billion, government purchases are $1 billion, and net exports are $0.3 billion. Find gross private domestic investment. Show work.

Answer 1

13) Here, we calculate GDP by Value Added method.

Now,

Value Added by:

Steel producer to Ford	Other input producers to Ford	Ford to Car Dealership	Car Dealership to Final Consumer (You)	Total GDP (US$)
2000	5000	(15000 – 2000 - 5000) = 8000	(18000 – 2000 – 5000 – 8000) = 3000	19000

14) GDP by definition is the final value of all goods and services produced within a year -inside a country. GDP calculation by Income Method adds up all the income earned in an economy. Clearly, only e) holds true for the definition.

15) e) Any of the above, as each of a), b), c), d) reflect different ways of calculating the GDP.

16) c) unpaid work in home, as unpaid work is not accounted for, and

      e) used automobiles, as again its’ transaction is not recorded in the entry book.

17)a) Real GDP per capita, as it measures the amount of income (in terms of price levels prevailing in the economy) each individual in the economy owns.

18) We know, GDP by AD method:
GDP = Consumption Exp + Gross Private Domestic Investment + Government Purchases + Net Exports

Or, Gross Private Domestic Investment = GDP - Consumption Exp + Government Purchases + Net Exports

That is, Gross Private Domestic Investment = $0.6 billion