ECON1130 Lecture Notes - Lecture 8: Retained Earnings, Black Market, Gdp Deflator

30 views3 pages

greywildebeest867

14 Feb 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

The bea reports two measures of gdp: nominal gdp: value of gdp using current price, real gdp: value of gdp using prices of some base year. Real gdp represents the effect of inflation: facilitates comparisons of growth of output over time. The gdp deflator is a weighted average of prices that changes every year. Inflation rate = change in p at t/p at t 1: t = year/time. Also = gdp deflator at t/gdp deflator at t 1. Note: the base year is updated every single year. Real gdp 2009 is the base year. The same as nominal gdp because it is the base year. Gdp value of goods and services produced domestically. Gnp value of goods and production by nations factors of production (citizens) no matter where they happen to be: gross national product. Gnp gdp = factor payments from abroad factor payments to abroad: net factor payments from abroad.

Related Questions

Suppose that the are two goods in the economy, Xylophones (X) and Yams (Y). In year t, consumers in the economy purchase 20 Xylophones at a price of $20 each and 100 Yams at a price of $2 each. In year t + 1, consumers in the economy purchase 18 Xylophones at a price of $30 each and 150 Yams at a price of $2.50 each.

1. Calculate the GDP deflator in years t and t + 1 with base year t. What is inflation according to this deflator? Show each step. (Hint: it will be helpful for you to first calculate nominal and real GDP in years t and t + 1. When you calculate real GDP, make sure that you use the appropriate base year).

2. Calculate the GDP deflator in years t and t + 1 with base year t + 1. What is inflation according to this deflator? Show each step. (Hint: you will need to calculate real GDP in years t and t + 1 using a different base year than you used in part 1. Once you calculate real GDP with the appropriate base year, you will follow the same steps that you did in part 1.)

3. Compare your answers to a and b above. Are they the same? If not, why not? How does chain-weighting address any potential difference?

4. Calculate the CPI in years t and t + 1, using year t as the base year.

5. Describe two ways in which the CPI differs from the GDP deflator.

6. There are several problems with using the CPI to calculate real GDP and measure growth. One of these problems is that the CPI does not account for changes in the quality of goods sold over time. A computer today is significantly more efficient than it was even just ten years ago, so even if the price of computers rise with inflation, you are getting significantly more computing power per dollar. How would this bias estimates of GDP growth and inflation?

4. Suppose the economy of Stockton produces four goods: strawberries, ice cream, sushi, andcoolers. However, consumers only purchase strawberries, ice cream, and sushi. Coolers are a final good, but are only used by ice cream trucks to store ice cream. The total production of all final goods is given in the table below: Year Strawberries Ice Cream Quantity Price ($ per unit) Quantity Price ($ per unit) 2010 8 $4 10 $2 2011 9 $5 14 $2 2012 10 $6 18 $3 Year Quantity Sushi Price ($ per unit) Coolers Quantity Price ($ per unit) 2010 12 $3 1 $12 2011 12 $3 2 $8 2012 15 $4 8 $2 (a) Using 2010 as the base year, calculate the value of the CPI in each year, and thencalculate the rate of inflation based on the CPI for all years (i.e., inflation rate from 2010 to 2011 and from 2011 to 2012). (b) Keeping in mind that the GDP deflator is a fixed-prices measure (fixed in the base year),calculate nominal GDP and real GDP for each year using 2010 as the base year. Using the expression for the GDP deflator, calculate the value of the GDP deflator in each year, then calculate the rate of inflation based on the GDP deflator for all years (i.e., inflation rate from 2010 to 2011 and from 2011 to 2012). (c) The following table gives the average nominal wage (in thousands) of workers in Stockton. In which year did they have the highest real wage?

sangriadolphin669

1. Which of the following transactions would add to the value of the U.S. GDP?

A. A college student buys a used car.
B. A college student sells her used textbooks back to the bookstore.
C. A grocery store purchases new freezers made in the United States.

D. U.S. citizen buys a new television manufactured in Asia.

2. The growth rate of real GDP:
A. depends on which year is used as the base year.
B. depends on how quickly prices are rising.
C. is always equal to the rate of growth of nominal GDP. D. is always more than the rate of growth of nominal GDP.

3. Which statement is true about GDP?
A. GDP includes the values of all final and intermediate goods and services.
B. Only the products made by American workers are included in the calculation of the US GDP.

C. Sales of old houses and used cars are included in the calculation of GDP for the current year.

D. In the US, GDP is calculated both annually and quarterly.

4. Which statement is true about GDP growth?
A. The GDP deflator is a measure of economic growth.
B. If we want to compare GDP over time, we should always compare real GDP.
C. Most economists choose nominal GDP growth as a single indicator of economic performance.

D. The GDP deflator tells the quantity change of production.

5. Which of the following is a way to compute GDP?

A. add up the wages paid to all workers

B. add up the quantities of all final goods and services
C. add up the market value of all final goods and services

D. add up the rents paid by all tenants

6. A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called:
A. inventory goods
B. transitory goods

C. final goods
D. intermediate goods

7. Martin, a US citizen, travels to Mexico and buys a newly manufactured motorcycle there. His purchase is included in:

A. both Mexican GDP and US GDP.

B. Mexican GDP, but not in US GDP.

C. US GDP, but not in Mexican GDP.

D. neither Mexican GDP nor US GDP.

8. Which of the following is included in Singapore GDP?

A. The value of production by a Singaporean working in the US.
B. The value of production by an American working in Singapore.
C. The value of production by a Singaporean that crosses the order to work in Malaysia.

D. All of the above are correct.

9. In the equation Y = C + I + G + NX,
A. Y represents the economy's total expenditure.

B. C represents household on durable goods.
C. all of the variables are always positive numbers.

D. All of the above are correct.

10. Consumption consists of spending by households on goods and services, except

purchases of intangible services.

purchases of durable goods.

purchases of new houses.

spending on education.

11. Which of the following is included in government purchase?

A. unemployment benefits a state government pays

B. social security payments the US government makes
C. the services of a US government attorney valued at the cost of her salary

D. All of the above are correct.

12. Transfer payments are:

A. included in GDP because they represent income to individuals.
B. included in GDP because they eventually will be spent on consumption.
C. not included in GDP because they are not payments for currently produced goods or services.

D. not included in GDP because taxes will have to be raised to pay for them.

13. Net exports equal
A. exports plus imports

B. exports minus imports

C. imports minus exports

D.GDP minus imports

14. In the economy of TAMIU in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was TAMIU's consumption in 2015?

A. $830

B. $1230

C. $1370

D. $1770

15. Nominal GDP will increase when

A. prices increase and output increases.
B. prices increase and output decreases.
C. prices decrease and output increases.

D. All of the above are correct.

16. Changes in real GDP reflect:

A. only changes in prices.

B. only changes in the amounts being produced.
C. both changes in prices and changes in the amounts being produced.

D. neither changes in prices nor changes in the amounts being produced.

17. Which of the following is correct?
A. Nominal GDP is always less than real GDP.

B. Nominal GDP is always greater than real GDP.
C. Nominal GDP equals real GDP in the base year.
D. Nominal GDP equals real GDP in all years but the base year.

18. The GDP deflator is the ratio of:

A. real GDP to nominal GDP.

B. real GDP to the inflation rate.
C. real GDP to nominal GDP.
D. nominal GDP to the inflation rate.

19. In 2012 the nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
A. $6.7 billion
B. $10 billion

C. $40 billion D. $100 billion

20. In the base year, the GDP deflator is always equal to A. -1
B. 0
C. 2

D. 1

21. GDP does not reflect:

A. the value of leisure.

B. the value of goods and services produced at home.

C. the quality of the environment.
D. All of the above are correct.

22. When economists talk about growth in the economy, they measure that growth as the:

A. absolute change in nominal GDP from one period to another.

B. percentage change in nominal GDP from one period to another.

C. absolute change in real GDP from one period to another.
D. percentage change in real GDP from one period to another.

23. The term economists use to describe a situation in which the economyâs overall price level is rising is:

A. economic growth

B. inflation
C. recession
D. business cycles

Use information from the Bureau of Economic Analysis (BEA) website, http://www.bea.gov/, answer question 24 and 25.

24. What is the real GDP growth rate in the 4th quarter of 2015 for the United States?

A. 1%
B. 2%
C. 3%

D. 4%

25. What is the value of real GDP in 1998 for the United States?

A. $11525.9 billion

B. $9089.2 billion

C. $11321.2 billion

D. $8889.7 billion

goldgnu271

ECON1130 Lecture Notes - Lecture 8: Retained Earnings, Black Market, Gdp Deflator

Document Summary

Get access

Related Questions