Question

1.

The following events occurred in 2020 in the United States. In column i write either “included” or“not included”in gross domestic product (GDP) for 2020 and in column ii explain why

a. EXAMPLE PROBLEM

Buy a new textbook from a bookstore

i. included

ii. C; final good

b.

McGraw-Hill (publisher) buys paper for

its textbooks from a U.S. supplier

i.

ii.

c.

The purchase of U.S. lumber by a contractor used to build a house in SouthWest Florida.

i.

ii.

d.

Person buys State Farm auto insurance

i.

ii.

e.

Dell Computer has inventory at the end

of the accounting period

i.

ii.

f.

Person purchases a new German

BMW built in South Carolina

i.

ii.

g. Mo D. Versified buys IBM common stock

i.

ii.

h.

U.S. Navy purchases a new American produced fighter jet

i.

ii.

i.

Salaries paid to military personnel stationed in the US

i.

ii. G; final service

j.

Educational services provided by Lee County public schools

i.

ii.

k.

Person wins the Florida lottery

i.

ii.

The purchase of moonshine (illegal)

i.

ii.

2.

The following events occurred in 2020 in the United States. Indicate the dollar amount (if any) that is

included in

gross domestic product

for 2020.

a.

GM purchases new windows for a Corvette from an American firm for

$__________

$7,000. The new Corvette is purchased for $77,000.

b.

Dante buys a used 2020 Corvette from Faust for $77,000

$__________

c.

A household rents a house for $25,000 to use as their residence

$__________

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Ch7

d.

A household’s FPL annual electric bill is $2,000

$__________

e.

A household rents a condo for $6,000 during their one month vacation

$__________

f.

FedEx purchases a new $200 million commercial jet from Boeing;

$__________

the value of the jet’s imported components was $20 million

g.

A Fort Myers resident purchases a new $70,000 Lexus,

$__________

the Lexus was imported from Japan

h.

$30 million sale of U.S. produced soybeans to China

$__________

i.

A woman gives a $500 Visconti Medici rollerball pen to her spouse

$__________

j.

Services provided at home by your significant other, the services

$__________

are valued at $150,000 per year

k.

College student Bud Weiser receives $2,000 from Moe Weiser

$__________

l.

A student receives a $2,000 scholarship

$__________

m.

A retiree receives $2,000 in social security each month

$__________

d.

A household’s FPL annual electric bill is $2,000

$__________

e.

A household rents a condo for $6,000 during their one month vacation

$__________

f.

FedEx purchases a new $200 million commercial jet from Boeing;

$__________

the value of the jet’s imported components was $20 million

g.

A Fort Myers resident purchases a new $70,000 Lexus,

$__________

the Lexus was imported from Japan

h.

$30 million sale of U.S. produced soybeans to China

$__________

i.

A woman gives a $500 Visconti Medici rollerball pen to her spouse

$__________

j.

Services provided at home by your significant other, the services

$__________

are valued at $150,000 per year

k.

College student Bud Weiser receives $2,000 from Moe Weiser

$__________

l.

A student receives a $2,000 scholarship

$__________

m.

A retiree receives $2,000 in social security each month

$__________

3.

The following events occurred in 2020 in the United States. Indicate the dollar amount (if any) that is

included in the

investment

component

(I

G

) of GDP for 2020.

a.

General Motors sells $10 million worth of 2019 new car inventory

$__________

b.

A corporation issues $10 million in new common stock.

$__________

It uses $5 million to build a new world headquarters, $2 million to

purchase new equipment, and $3 million to repay bank loans

c.

The purchase of a two-year old office building for $2,000,000;

$__________

the purchase price is 50% of appraised value

d.

The purchase of 100 acres of unimproved land for $2,000,000

$__________

e.

A household purchases a newly-built house for $300,000

$__________

f.

A general contractor does $15,000 worth of remodeling to a house

$__________

g.

A household purchases a new $15,000 surround-sound stereo

$__________

entertainment system for their home in LaBelle

h.

A German firm builds a $20 million apartment complex in Lee County

$__________

i.

FSW hires a construction company to build a $20 million dormitory

$__________

j.

A hurricane destroys a $20 million office building in Collier County

$__________

Answer 1

a)Buy a new textbook

Would be included, part of consumption of final good.

b)The company is buying paper for manufacturing of books,

Not included because it is an intermediary good.

c)The purchase of lumber would not be included in final GDP because it is used for production and hence would be an intermediary good.

d)Insurance is a part of final good and hence would be included in GDP.

e) It would be included in gdp as it was produced to be sold and is unsold inventory( a part of production of final good)

f) Would be included in GDP as it is produced within the boundaries of the country and is a final consumption good.

G) Buying common stock is not a part of GDP because it is just papers being traded.

If new stocks were issued, they would have been part of investment in gdp.

So these are not included in gdp.

H) It would be included in gdp because it is a part of government expenditure and also produced within the country.

I) Salaries would be included as these are a part of final good. So they are included.

J) It would be part of GDP because it is the government expenditure spent on the students and hence part of GDP.

K) Lottery would not be included in gdp because thete is no production of goods and services.

L) It would not be part of GDP as it is illegal exchange of goods and services. (Underground economy)