Decrease the gross domestic product measured

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1. How can an increase in taxation decrease the gross domestic product measured?

2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.

Year

Good X

Good Y

2005

$3

$6

2006

4

7

2007

4.5

7.5

3. Using the expenditure approach, calculate GDP using the following data.

Item

Amount in dollars (billions)

Consumption

7,600

Consumption of Durable Goods

1,600

Consumption of Non Durable Goods

2,800

Consumption of Services

3,200

Investment

2,750

Fixed Investment

1,000

Government purchases of Goods & Services

1,675

Government Transfer Payments

450

Exports

750

Imports

1,600

GDP Equals


4. What is the importance of measuring per capita GDP?

5. What is the underground economy? How does it affect GDP calculations? Provide three examples of underground economy transactions.

Reference no: EM131153791

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