ECON 2301 TEST #2 (Chapters 19, 20, 21, and 22) Suggested Study Topics - Fall, 2

Question

ECON 2301 TEST #2 (Chapters 19, 20, 21, and 22) Suggested Study Topics - Fall, 2018

1. How “double counting” might result in the measurement of an economy’s GDP and how it canbe avoided?

2. Identification and definition of the four major expenditure categories of GDP?

3. How/why particular purchases of final goods fit into each of the four categories of expenditure categories of GDP?

4. Identification/examples of so-called “expenditure” categories and the extent to which they make up total GDP?

5. Identification/examples of so-called “government purchases” and how/whether they go intothe measurement of GDP?

Explanation / Answer

Ans

1 it increase gdp(this is wrong actually).It can be avoided by taking into consideration only value of final goods

2 consumption =a thing consumed by domestic individuals

Investment=plant, machinery etc which raise productivity capacity and also includes inventory

Govt expenditure=whatever Govt spends except on transfer payments

Net exports=value of exports minus value of imports

3 consumption includes goods which are lost after use. Investment includes those goods which increase productive capacity. Govt expenditures are different from private expenditures in that they have different implications on economy. Net exports measure value creation due to exports

4 purchase of soft drinks increase gdp by its final value, Govt salary to employee increase gdp or expenditure by full amount of salary. 100 million investment in aircraft machinery production will increase gdp or expenditures by 100 million.

5 services of employees, purchases from private sector, Govt investment go into measurement of gdp but not transfer payments

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