Name/I.D. Number: Section: Date: Part 3. Discussion Questions and Problems 1."I just heard on the news that GDP is higher this year than it was last year. This means that we're better off this year than last year." Comment. 2. Which of the following are included in the calculation of this year's GDP? (Use Check mark [ v] for YES or Cross mark [ X ] for NO in the boxes below). [ ] (a) 12-year-old Johnny mowing his family's lawn; [ ] (d) Ed Ferguson's receipt of a Social Security payment; [ ] (b) Dave Malone buying a used car; [ ] (e) The illegal drug transaction at the corner of Elm and Fifth. [ ] (c) Barbara Wilson buying a bond issued by General Motors; 3. Discuss the problems you see in comparing the GDPs of two countries, say, the United States and the People's Republic of China. 4. The manuscript for this book was keyed by the author. Had he hired someone to do the keying, GDP would have been higher than it was. What other activities would increase GDP if they were done differently? What activities would decrease GDP if they were done differently? 5. Why does GDP omit the sales of used goods? Of financial transactions? Of government transfer payments? 6. A business firm produces a good this year that it doesn't sell. As a result, the good is added to the firm's inventory. How does this inventory good find its way Into GDP? 7. Economists prefer to compare Real GDP figures for different years instead of comparing GDP figures. Why? 8. What is the difference between a recovery and an expansion? 9. Define each of the following terms: a. Contraction: b. Business cycle: c. Trough d. Disposable income: e. Net domestic product: 10. Does the expenditure approach to computing GDP measure U.S. spending on all goods, U.S. spending on only U.S. goods, or U.S. and foreign spending on only U.S. goods? Explain your answer. 11. In the first quarter of the year, Real GDP was $400 billion; in the second quarter, it was $398 billion; in the third quarter, it was $399 billion; and in the fourth quarter, it was $395 billion. Has there been a recession? Explain your answer.NameII.D. Number: Section: Date: Part 4. Economic Equations and Graphs 1. Net exports are -$114 billion, and exports are $857 billion. What are imports? Consumption spending is $3.708 trillion, spending on nondurable goods is $1.215 trillion, and spending on services is $2.041 trillion. What does spending on durable goods equal? Inventory investment is $62 billion, and total investment is $1.122 trillion. What does xed investment equal? In year 1, the prices of goods X, Y, and Z are $2, $4, and $6 per unit, respectively. In year 2, the prices of goods X, Y, and Z are $3, $4, and $7, respectively. In year 2, twice as many units of each good are produced as in year 1. In year 1, 20 units of X, 40 units of Y, and 60 units of Z are produced. If year 1 is the base year, what does Real GDP equal in year 2'? Nondurable goods spending = $400 million, durable goods spending = $300 million, new residential housing spending = $200 million, and spending on services = $500 million. What does consumption equal? According to the circularow diagram in Exhibit 4, consumption spending ows into US. product markets, but import spending does not. But US. households buy imported goods in US. markets, don't they? Explain. If Real GDP is $487 billion in year 1 and $498 billion in year 2, what is the economic growth rate equal to? The following gure shows a business cycle. Identify each of the following as a phase of the business cycle: a) PointA: b) Between points A and B : 0) Point B : d) Between points B and C : e) Between points 0 and D: ( ( ( ( ( (f) Point D