Question

1a.

Suppose Kim purchases a new personal computer produced in China for $ 3,300. What is the effect on the components of GDP and GDP as a whole?

Instructions: If there is no impact on that component enter a 0 for $0. If there is a positive contribution to the component enter in a the whole dollar amount. If there is a negative contribution to the component enter a negative sign before the dollar amount. Be sure all boxes include a number.

Consumption $

Investment $

Government Expenditures $

Net Exports $

Change in GDP as a result of the transaction $

1b.

The annual output and prices of a 3-good economy are shown in the table below. Assume Year 1 is the base year.

	Quantity of Ice Cream	Price of Ice Cream	Quantity of Shampoo	Price of Shampoo	Quantity of Peanut Butter	Price of Peanut Butter
Year 1	4	$5	2	$3	4	$2
Year 2	6	$7	3	$5	3	$4

What was nominal GDP in year 1? $

What was real GDP in year 1? $     

What was nominal GDP in year 2? $

What was real GDP in year 2? $    

Answer 1

1. (a) Kine Aurchases a new personal computer mean it 404 personal nouseeuflisch so, Coustenibhion Corepousuta by $3300 Consumption $ 3300 1 Investment $0 Gout Expenditure &0 Net Export $0 Change in GoP as a result $ 3300 (increase) of the transaction Nominal GDP in Year I = Price X Greaunty (Yeard) (Yearl) = $514) + $3 (2) +$2(4) = $34 Nominal GDP in years = $34 Real GDP in Yeon! = GDP Nomunal CAP in Year 2 - $.34 (Because in Bane Year Nominal - Real GDP ... due to no inflation) - Price x Quauhty (Year2) Year 2) = $716) + $5(3) + $413) $69] comon year

Real GDP (Year 2) = Price x Quantity (Yeary) (Year) E $5 (6) + $(3)(3) + $ 2 (3) = $30 + $9 + $6 - $45 - Real GDP in Yeal 2 - $45