1. ntermediate goods - for example, the memory chips in your computer or phone - are products that companies pay money for in order to incorporate them into the final goods for retail sales. Why are intermediate goods, such as these, not counted when we are calculating GDP? Explain why counting them would be problematic and deceptive.

1. Assume the economy only produces the four goods listed below, and that all the wool is used in the production of hats. Calculate real GDP for 2017 and 2018, using 2012 as the base year. What was the growth rate (%) in real GDP between 2017 and 2018? (Show all calculations and explain your answers.)

	2012	2017	2018
Quantity	Price	Quantity	Price	Quantity	Price
Slippers	90	$50.00	100	$60.00	100	$65.00
Tacos	75	$2.00	100	$2.00	120	$2.25
Hats	50	$30.00	50	$25.00	65	$25.00
Wool	100	$0.80	800	$0.60	120	$0.70

1. Calculate the GDP deflator for each year below. Which year from 2015 to 2018 saw the largest increase in the GDP deflator over the prior year in percentage terms? (Show your work and explain your answers.)

Year	Nominal GDP	Real GDP
2014	$14,964	$14,784
2015	$15,518	$15,021
2016	$16,163	$15,369
2017	$16,768	$15,710
2018	$16,245	$16,086