1) If Max receives an unemployment check, would you include that transfer paymen
ID: 3008236 • Letter: 1
Question
1) If Max receives an unemployment check, would you include that transfer payment from the government in this year’s GDP? Why or why not?
2) In the following situations, explain what is counted in this year’s GDP:
A. You bought a new Wii at GameStop last year and resold it on eBay this year.
B. You purchase an Investing for Dummies book at Barnes and Noble.
C. You purchase a historic home using the services of a real estate agent.
D. You detail your car so it is spotless inside and out.
E. You purchase a new hard drive for your old laptop.
3) To which component of GDP expenditure (C, I, G, or NX) does each of the following belong?
A. Swiss chocolates imported from Europe.
B. A driver’s license you receive from the Department of Motor Vehicles.
C. A candle you buy at the local store.
D. A new home.
4) Many goods and services are illegally sold or legally sold but not reported to the government. How would increased efforts to count those goods and services affect our calculation of GDP?
5) Fill in the missing data in the following table:
Year
Nominal GDP
Real GDP
GDP Deflator
2007
100000
??
94
2008
??
112000
100
2009
130000
114000
??
2010
150000
??
117.2
2011
??
145000
130
Year
Nominal GDP
Real GDP
GDP Deflator
2007
100000
??
94
2008
??
112000
100
2009
130000
114000
??
2010
150000
??
117.2
2011
??
145000
130
Explanation / Answer
1) The money received through unemployment cheque will not be included in that year's GDP. Because the money received through unemployment cheque is a transferred payment and transferred payments made by one party to another party for no good or services are not considered in GDP.
2) Following transactions would be considered in GDP:
B. You purchase an Investing for Dummies book at Barnes and Noble.
E. You purchase a new hard drive for your old laptop.
Rest of the transactions won't be considered in GDP.
3)
A. Swiss chocolates imported from Europe. (This is Net Expert (NE))
B. A driver’s license you receive from the Department of Motor Vehicles. (This is Goverment Purchase (G))
C. A candle you buy at the local store (This is Consumption(C))
D. A new home (This is Investment (I))
4) Many goods and services are illegally sold or legally sold but not reported to the government. How would increased efforts to count those goods and services affect our calculation of GDP?
Increased efforts with respect to count these illegally traded or secretly traded goods or services is made and due to these efforts we are able to include the market value of these final goods and services in the official calculation of GDP then GDP will increase in comparison to GDP calculated without these goods and services being included. This is because after reporting of these illegally traded or secretly traded goods and services, total production in the economy will be higher in comparison to earlier time period when these goods and services are not reported.Higher the production, higher is the value of GDP. Therefore, increased efforts to count those goods and services will increase the value of GDP.
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