US consumption expenditure includes:
A) the purchase of consumption goods made domestically but consumed by foreigners.
B) purchase of goods and services by local government.
C) the production of consumption goods not sold and held in inventory.
D) consumer services, durables and non-durable goods.
US consumption expenditure includes:
A) the purchase of consumption goods made domestically but consumed by foreigners.
B) purchase of goods and services by local government.
C) the production of consumption goods not sold and held in inventory.
D) consumer services, durables and non-durable goods.
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1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.
2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.
|
Year |
Good X |
Good Y |
|
2005 |
$3 |
$6 |
|
2006 |
4 |
7 |
|
2007 |
4.5 |
7.5 |
3. Using the expenditure approach, calculate GDP using the following data.
|
Item |
Amount in dollars (billions) |
|
Consumption |
7,600 |
|
Consumption of Durable Goods |
1,600 |
|
Consumption of Non Durable Goods |
2,800 |
|
Consumption of Services |
3,200 |
|
Investment |
2,750 |
|
Fixed Investment |
1,000 |
|
Government purchases of Goods & Services |
1,675 |
|
Government Transfer Payments |
450 |
|
Exports |
750 |
|
Imports |
1,600 |
|
GDP Equals |
Ā |
4. a. What is the importance of measuring per capita GDP?
b. Why nominal GDP can be misleading?
