Question

HOMEWORK A2a – Required

Chapter ‘Tracking the U.S. Economy’                        

Q2.        Define gross domestic product.   Determine whether each of the following would be included in the 2007 U.S. gross domestic product:

1. Profits earned by Ford Motor Company in 2007 on automobile production in Ireland.
2. Automobile parts manufactured in the United States in 2007 but not used until 2008.
3. Social Security benefits paid by the U.S. government in 2007.
4. Ground beef purchased and used by McDonald’s in 2007.
5. Ground beef purchased and consumed by a private U.S. household in 2007.
6. Goods and services purchased in the United States in 2007 by a Canadian tourist.

Q7.      Which of the following is a necessary condition – something that must occur—for nominal GDP to rise? Explain your answers.

1. Actual production must increase.
2. The price level must increase
3. Real GDP must increase
4. Both the price level and actual production must increase.
5. Either the price level or real GDP must increase.

Homework Sheet
Problem 1            Using the definition of GDP determine whether the following economic activities would be included (I) in GDP or excluded (E).
a. ____ the sale of a stock
b. ____ the sale of a home owned by Mr. Jones
c. ____ the government builds a new office building
d. ____ the purchase of a crane by a construction company
e. ____ a factory that was built to replace one destroyed in a fire.

HOMEWORK A1b - Required

Chapter ‘Tracking the U.S. Economy’

Q2.        What two kinds of changes in the capital stock can improve labor productivity? How can each type be illustrated with a per-worker production function? What determines the slope of the per-worker production function?

Q4.      Explain how output per capita can grow faster than labor productivity. Is it possible for labor productivity to grow faster than output per capita?

Q5.      What measures can government take to promote the development of practical technologies?

Q7.      How do “rules of the game” affect productivity and growth? What types of “rules” should a government set to encourage growth?          

Chapter ‘Productivity and Growth’

Q6.      Explain why each of the following should be taken into account when GDP data are used to compare the ‘level of well-being’ in different countries:

1. Population levels
2. The distribution of income
3. The amount of production that takes place outside of markets
4. The length of the average work week
5. The level of environmental pollution

Answer 1

A2a

Q2

GDP is the final value of goods and services produced within a country's borders in a given year.

Profits earned by Ford Motor Company in 2007 on automobile production in Ireland.

No, as it is produced outside the country.

Automobile parts manufactured in the United States in 2007 but not used until 2008.

Yes, as it is produced in 2007 It would be part of inventory.

Social Security benefits paid by the U.S. government in 2007.

Q7

E. Either price level or real GDP which means production level increases. Nominal GDP is current prices times production of goods and services.

No, as this is a transfer payment.

Ground beef purchased and used by McDonald’s in 2007.

No, as ground beef is an intermediary good used for production of final goods. Only final goods are included in GDP.

Ground beef purchased and consumed by a private U.S. household in 2007.

Yes. as ground beef is for final consumption.

Goods and services purchased in the United States in 2007 by a Canadian tourist.

Yes, it is an export as it is purchased by a foreigner.