Question 2: [1 point] What is the relationship between aggregate income and aggr

ID: 1166858 • Letter: Q

Question

Question 2: [1 point] What is the relationship between aggregate income and aggregate production?

Question 3: [1 point] In the United States, many children receive day-care from commercial providers. In Africa, children are almost all cared for by relatives. How would this difference affect comparisons of GDP per person?

Question 4: [1 point] Using the above table, calculate GDP. Explain the approach (expenditure or income) that you used to calculate GDP.

Question 5: [1 point] Give two examples of how Real GDP might be underestimating the welfare and standard of living of U.S. households.

Billions of pounds 685 791 394 267 273 209 267 322 38 366 Item Wages paid to labor Consumption expenditure axes Transfer payments Profits Investment Government expenditure Exports Saving Imports

Explanation / Answer

2.Aggregate production determine the output of an economy.A part of income is saved and invested into production.Higher the income,higher the savings,higher the production.Thus,the relationship is positive.

3.Recieving day care from commercial providers is an economic activity that involves monetary transaction.People associated in day care business earn income.

Day care received by relatives is not an economic activity as it does not involve monetary transaction.

GDP in US will be higher that Africa because people in day care business are earning incomes in US but not in Africa.

4.GDP by expenditure approach.It is the sum of consumption expenditure, investment, government expenditure and net exports.

GDP=C+I+G+NX(X-M)

GDP=791+209+267+(322-366)

GDP=1223

5.Real GDP is not a good indicator of measuring welfare.

RealGDP can be high even in countries with high income inequalities like India.High income inequality does not signify welfare of the people.

Real GDP does not take into account the state of human capital(health, education etc) for an economic which plays a crucial role in the overall welfare of the economy.

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Question 2: [1 point] What is the relationship between aggregate income and aggr

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