1、405 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Quick Quizzes:1. Gross domestic product measures two things at once: (1) the total income of everyone in the economy and (2) the total expenditure
2、 on the economys output of final goods and services. It can measure both of these things at once because all expenditure in the economy ends up as someones income.2. The production of a pound of caviar contributes more to GDP than the production of a pound of hamburger because the contribution to GD
3、P is measured by market value and the price of a pound of caviar is much higher than the price of a pound of hamburger.3. The four components of expenditure are: (1) consumption; (2) investment; (3) government purchases; and (4) net exports. The largest component is consumption, which accounts for m
4、ore than 70 percent of total expenditure.4. Real GDP is the production of goods and services valued at constant prices. Nominal GDP is the production of goods and services valued at current prices. Real GDP is a better measure of economic well-being because changes in real GDP reflect changes in the
5、 amount of output being produced. Thus, a rise in real GDP means people have produced more goods and services, but a rise in nominal GDP could occur either because of increased production or because of higher prices.5. Although GDP is not a perfect measure of well-being, policymakers should care abo
6、ut it because a larger GDP means that a nation can afford better healthcare, better educational systems, and more of the material necessities of life.Questions for Review: 1. An economys income must equal its expenditure, because every transaction has a buyer and a seller. Thus, expenditure by buyer
7、s must equal income by sellers.2. The production of a luxury car contributes more to GDP than the production of an economy car because the luxury car has a higher market value.3. The contribution to GDP is $3, the market value of the bread, which is the final good that is sold.4. The sale of used re
8、cords does not affect GDP at all because it involves no current production.5. The four components of GDP are consumption, such as the purchase of a DVD; investment, such as the purchase of a computer by a business; government purchases, such as an order for military aircraft; and net exports, such a
9、s the sale of American wheat to Russia. (Many other examples are possible.)6. Economists use real GDP rather than nominal GDP to gauge economic well-being because real GDP is not affected by changes in prices, so it reflects only changes in the amounts being produced. You cannot determine if a rise
10、in nominal GDP has been caused by increased production or higher prices.7.Chapter 23/Measuring a Nations Income 406 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Year Nominal GDP Real GDP GDP Defl
11、ator2010 100 X $2 = $200 100 X $2 = $200 ($200/$200) X 100 = 1002011 200 X $3 = $600 200 X $2 = $400 ($600/$400) X 100 = 150The percentage change in nominal GDP is (600 200)/200 x 100% = 200%. The percentage change in real GDP is (400 200)/200 x 100% = 100%. The percentage change in the deflator is
12、(150 100)/100 x 100% = 50%.8. It is desirable for a country to have a large GDP because people could enjoy more goods and services. But GDP is not the only important measure of well-being. For example, laws that restrict pollution cause GDP to be lower. If laws against pollution were eliminated, GDP
13、 would be higher but the pollution might make us worse off. Or, for example, an earthquake would raise GDP, as expenditures on cleanup, repair, and rebuilding increase. But an earthquake is an undesirable event that lowers our welfare.Problems and Applications1. a. Consumption increases because a re
14、frigerator is a good purchased by a household.b. Investment increases because a house is an investment good.c. Consumption increases because a car is a good purchased by a household, but investment decreases because the car in Fords inventory had been counted as an investment good until it was sold.
15、d. Consumption increases because pizza is a good purchased by a household.e. Government purchases increase because the government spent money to provide a good to the public.f. Consumption increases because the bottle is a good purchased by a household, but net exports decrease because the bottle wa
16、s imported.g. Investment increases because new structures and equipment were built.2. With transfer payments, nothing is produced, so there is no contribution to GDP.3. If GDP included goods that are resold, it would be counting output of that particular year, plus sales of goods produced in a previ
17、ous year. It would double-count goods that were sold more than once and would count goods in GDP for several years if they were produced in one year and resold in another.4. a. Calculating nominal GDP:2010: ($1 per qt. of milk 100 qts. milk) + ($2 per qt. of honey 50 qts. honey) = $2002011: ($1 per
18、qt. of milk 200 qts. milk) + ($2 per qt. of honey 100 qts. honey) = $4002012: ($2 per qt. of milk 200 qts. milk) + ($4 per qt. of honey 100 qts. honey) = $800Calculating real GDP (base year 2010):2010: ($1 per qt. of milk 100 qts. milk) + ($2 per qt. of honey 50 qts. honey) = $2002011: ($1 per qt. o
19、f milk 200 qts. milk) + ($2 per qt. of honey 100 qts. honey) = $4002012: ($1 per qt. of milk 200 qts. milk) + ($2 per qt. of honey 100 qts. honey) = $400Calculating the GDP deflator:Chapter 23/Measuring a Nations Income 407 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or du
20、plicated, or posted to a publicly accessible website, in whole or in part.2010: ($200/$200) 100 = 1002011: ($400/$400) 100 = 1002012: ($800/$400) 100 = 200b. Calculating the percentage change in nominal GDP:Percentage change in nominal GDP in 2011 = ($400 $200)/$200 100% = 100%.Percentage change in
21、nominal GDP in 2012 = ($800 $400)/$400 100% = 100%.Calculating the percentage change in real GDP:Percentage change in real GDP in 2011 = ($400 $200)/$200 100% = 100%.Percentage change in real GDP in 2012 = ($400 $400)/$400 100% = 0%.Calculating the percentage change in GDP deflator:Percentage change
22、 in the GDP deflator in 2011 = (100 100)/100 100% = 0%.Percentage change in the GDP deflator in 2012 = (200 100)/100 100% = 100%.Prices did not change from 2010 to 2011. Thus, the percentage change in the GDP deflator is zero. Likewise, output levels did not change from 2011 to 2012. This means that
23、 the percentage change in real GDP is zero.c. Economic well-being rose more in 2010 than in 2011, since real GDP rose in 2011 but not in 2012. In 2011, real GDP rose but prices did not. In 2012, real GDP did not rise but prices did.5. a.Calculating Nominal GDP:Year 1: (3 bars $4) = $12Year 2: (4 bar
24、s $5) = $20Year 3: (5 bars $6) = $30b.Calculating Real GDP:Year 1: (3 bars $4) = $12Year 2: (4 bars $4) = $16Year 3: (5 bars $4) = $20c.Calculating the GDP delator:Year 1: $12/$12 100 = 100Year 2: $20/$16 100 = 125Year 3: $30/$20 100 = 150d.The growth rate from Year 2 to Year 3 = (16 12)/12 100% = 4
25、/12 100% = 33.3%e. The inflation rate from Year 2 to Year 3 = (150 125)/125 100% = 25/125 100% = 20%.f. To calculate the growth rate of real GDP, we could simply calculate the percentage change in the quantity of bars. To calculate the inflation rate, we could measure the percentage change in the pr
26、ice of bars.6.Year Nominal GDP GDP Deflator Chapter 23/Measuring a Nations Income 408 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.(billions) (base year: 2005)2009 $14,256 109.81999 $9,353 86.8a.
27、 The growth rate of nominal GDP = 100% ($14,256/$9,353)0.10 1 = 4.3%b. The growth rate of the deflator = 100% (109.886.8)0.10 1 = 2.4%c. Real GDP in 1999 (in 2005 dollars) is $9,353/(86.8/100) = $10,775.35.d. Real GDP in 2009 (in 2005 dollars) is $14,256/(109.8/100) = $12,983.61.e. The growth rate o
28、f real GDP = 100% ($12,983.61/$10,775.35)0.10 1 = 1.9%f. The growth rate of nominal GDP is higher than the growth rate of real GDP because of inflation.7. Many answers are possible.8. a. GDP is the market value of the final good sold, $180.b. Value added for the farmer: $100.Value added for the mill
29、er: $150 $100 = $50.Value added for the baker: $180 $150 = $30.c. Together, the value added for the three producers is $100 + $50 + $30 = $180. This is the value of GDP.9. In countries like India, people produce and consume a fair amount of food at home that is not included in GDP. So GDP per person
30、 in India and the United States will differ by more than their comparative economic well-being.10. a. The increased labor-force participation of women has increased GDP in the United States, because it means more people are working and production has increased.b. If our measure of well-being include
31、d time spent working in the home and taking leisure, it would not rise as much as GDP, because the rise in womens labor-force participation has reduced time spent working in the home and taking leisure.c. Other aspects of well-being that are associated with the rise in womens increased labor-force p
32、articipation include increased self-esteem and prestige for women in the workforce, especially at managerial levels, but decreased quality time spent with children, whose parents have less time to spend with them. Such aspects would be quite difficult to measure.11. a. GDP equals the dollar amount Barry collects, which is $400.b. NNP = GDP depreciation = $400 $50 = $350.c. National income = NNP = $350.d. Personal income = national income retained earnings indirect business taxes = $350 $100 $30 = $220.e. Disposable personal income = personal income personal income tax = $220 $70 = $150.
