Defined as market value of final goods and services produced

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1. GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.

2. Try to explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods produced and not (yet) sold as of the end of the year IS included directly as part of that year’s GDP.

3. Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?

4. Identify the immediate effect of each of the following events on U.S. GDP and its components.

a. James receives a social security check.

b. John buys an Italian sports car.

c. John buys domestically produced tools for his construction company

5. You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully.

6. U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does it not tell us, about the well-being of U.S. residents?

Reference no: EM13885640

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