Reference no: EM13334372
1. (1.1) How does the income approach to measuring gdp differ from the expenditure approach? Explain the meaning of value added and it's importance in the income approach. Consider the following data for the selling price at each stage in the production of a 5-pound bag of flour sold by your local grocer. Calculate the final market value of the flour.
Stage of production Sale Price
Farmer $0.30
Miller 0.50
Wholesaler 1.00
Grocer 1.50
2. (1.2) Given the following annual information about a hypothetical country, answer questions a through d.
Billions of dollars
Personal consupmtion expenditures........................................200
Personal taxes.................................................................50
exports.........................................................................30
depreciation...................................................................10
government purchases........................................................50
gross private domestic investment.........................................40
imports.........................................................................40
Government transfer payments..............................................20
a. What is the value of GDP?
b. what is the value of net domestic product?
c. What is the value of net investment?
d. What is the value of net exports?
3. (2.1) What are leakages from and injections into the circular flow? How are leakages and injections related in the circular flow?
4. (3.1) Explain why each of the following should be taken into account when GDP data are used to compare the "level of well-being" in different countries:
a. Population levels
b. The distribution of income
c. the amount of production that takes place outside of markets
d. the length of the average workweek
e. the level of environmental pollution.
5. (4.1) Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of twinkies, fuel oil and cable tv are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year's cost of the market basket and the value of the current year's price index. What is this year's percentage change in the price level compared to the base year?
A. Product-Twinkies, Quality in market basket=365 packages, Prices in base year $.89/package, cost of basket in base year (3) = (1) x (2) = $324.85, Prices in current year=$0.79, Cost of basket in current year (5) = (1) x (4) $288.35
B. Product-Fuel oil, Quality in market basket=500 Gallons, Prices in base year $.1.00/Gallon, cost of basket in base year (3) = (1) x (2) = $500.00, Prices in current year=$1.50, Cost of basket in current year (5) = (1) x (4) $750.00
C. A. Product-Cable TV, Quality in market basket=12 Months, Prices in base year $30.00/Month, cost of basket in base year (3) = (1) x (2) = $360.00, Prices in current year=$30.00, Cost of basket in current year (5) = (1) x (4) $360.00
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