Hello there Please answer question 3, 4, 5, 6 & 7. The question Please answer al

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Hello there Please answer question 3, 4, 5, 6 & 7. The question Please answer all questions from 3-7. Questions noumber 1 & 2 are already salved. Gross Domestic Product Discussion Questions- Show Your Work to recieve full credit ProductQuantity Pric nit Steel iPods Autos Legal services 1,000 5,000 500 100 S100 200 5,000 1) Calculate GDP using the data above 2) Make up a one good economy that produces one good in Y1 and Y2. Assume the price in Y1 is $1 and in Y2 it is $2. Make the quantity in both years 1. Calculate Nominal GDP Calculate the growth rate between Y1 & Y2 (see book) Now pick a base year (indicate it on your work). Now calculate real GDP for Y1 and Y2 and calculate the growth rate. Is it the same when looking at nominal GDP why or why not? 3) Why do we subtract out Imports from GDP: give an example? 4) Why do we not include intermediate goods in GDP, give an example? 5) When measuring production is it best to use nominal or real GDP? 6) Identify which would be included in 2016 GDP and in what category . Federal Court House built in 2016 in Texas Taxes paid in Harris County on new home in 2016 Ford made in MX that was purchased by American in 2016 Lumber used to build a house that was completed in 2016 Home sold in Houston that was built in 2014? Commission paid to Real Estate agent for selling the home above in 2016 Car made in Alabama sold to a German student in 2016 7) Using the data below calculate real GDP in 2007 and 2011 using 2011 as the base year. Was the country more productive in 2011? 2007 Preduct Qu Shoes

Explanation / Answer

3. GDP & Imports

imports are subtracted from GDP because GDP of a given country is defined as the value of all final goods and services produced in a country during a given financial year where imports are goods and services produced by other countries and consumed by the given country.

for example, suppose you purchased a commodity that is made in china and imported to USA. As you have purchased the item, it has been added to the GDP of USA. now it created a problem of double counting. The value of that commodity has been already added to the GDP of China and the price you have paid for the commodity will however reach the Chinese economy as a part of import payment. therefore we subtract value of import from GDP

4. GDP & intermediate goods

some goods may be used by other producers as their input materials. These goods are called intermediate goods and they mostly used as raw materials or inputs for the production of other commodities and are not final goods. for instance , steel sheets used in the production of automobiles.

The value of ggods already includes the value of intermediate goods that have entered into their production as inputs. now adding them separately will lead to the error of double counting.

5.nominal GDP is the value of final goods and services claculated at current prices

real GDP is the value of final goods and services calculated at constant prices

real GDP is more accurate measure of production because real GDP is not affected by changes in price. Changes in real GDP reflects the changes in the output only.

6. federal court house built in 2016 - will be included as government expenditure in expenditure method

taxes paid in home - will be included as part of taxes paid in income method

ford made in Mexico - will be deducted from GDP because it is an import

lumber used to built - will be included as expenditure on final goods

house built in 2014 will not be counted in 2016 GDP

commission paid will be included in GDP as a part of income received

car made in Alabama - will be included as it is produced with in the country. will be included as a part of value of final goods produced within the country

7. Real GDP in 2007 ; 2011 base year

Real GDP2007 = Q2007 * P2011 = (100*12) + (20*7)+ (50*20) + (200*45) = 1200 + 140 + 1000 + 9000 = 11340

Real GDP2011 = Q2011 * P2011 = (120*12) + (22*7) + (45*20)+ (210*45) = 1440+154+900+9450=11944

country was more productive in 2011 as the real GDP value is higher in 2011 than in 2007.

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